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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                            ------------------------

                                   FORM 10-K

<TABLE>
<C>        <S>
(MARK ONE)
   /X/     Annual Report pursuant to Section 13 or 15(d) of the
           Securities Exchange Act of 1934 for the fiscal year ended
           December 31, 1999.
                                        or
   / /     Transition Report pursuant to Section 13 or 15(d) of the
           Securities Exchange Act of 1934 (No Fee Required) for the
           transition period from to .

                   Commission File Number 333-20095

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                        ATRIUM COMPANIES, INC.
        (Exact name of Registrant as specified in its charter)

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<TABLE>
<S>                                            <C>
                   DELAWARE                                      75-2642488
       (State or other jurisdiction of                         (IRS Employer
        incorporation or organization)                     Identification Number)

                            1341 W. MOCKINGBIRD LANE, SUITE 1200W
                                     DALLAS, TEXAS 75247
                     (Address of executive offices, including zip code)
                                       (214) 630-5757
                    (Registrant's telephone number, including area code)
</TABLE>

Securities registered pursuant to Section 12(b) and (g) of the Act: NONE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /

State the aggregate market value of the voting stock held by non-affiliates of
the registrant--NONE

Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /

    As of March 30, 2000, the registrant had 100 shares of Common Stock, par
value $.01 per share outstanding.

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                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

                                 1999 FORM 10-K

                               TABLE OF CONTENTS

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<CAPTION>
 ITEM NO.                           DESCRIPTION                           PAGE
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<S>         <C>                                                           <C>

                                       PART I

Item 1.     Business....................................................    3

Item 2.     Properties..................................................   12

Item 3.     Legal Proceedings...........................................   13

Item 4.     Submission of Matters to a Vote of Security Holders.........   13

                                      PART II

Item 5.     Market for Registrant's Common Equity and Related
            Stockholder Matters.........................................   14

Item 6.     Selected Financial Data.....................................   14

Item 7.     Management's Discussion and Analysis of Financial Condition
            and Results of Operations...................................   15

Item 8.     Financial Statements and Supplementary Data.................   22

Item 9.     Changes in and Disagreements with Accountants on Accounting
            and Financial Disclosure....................................   22

                                      PART III

Item 10.    Directors and Executive Officers of the Registrant..........   23

Item 11.    Executive Compensation......................................   25

Item 12.    Security Ownership of Certain Beneficial Owners and
            Management..................................................   32

Item 13.    Certain Relationships and Related Transactions..............   33

                                      PART IV

Item 14.    Exhibits, Financial Statement Schedules and Reports on Form
            8-K.........................................................   36

Signatures..............................................................   37
</TABLE>

                                       2
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                                     PART I

ITEM 1.  BUSINESS

    THE TERM "COMPANY" REFERS TO ATRIUM COMPANIES, INC. (THE REGISTRANT) AFTER
THE RECAPITALIZATION DESCRIBED ON PAGE 10 AND THE REVERSE ACQUISITION OF WING
INDUSTRIES, INC. AND ITS PARENT, WING INDUSTRIES HOLDINGS, INC. (TOGETHER
"WING"). D AND W HOLDINGS, INC. ("D AND W") IS THE DIRECT PARENT OF ATRIUM
CORPORATION ("CORP"), THE DIRECT PARENT OF THE COMPANY. THE TERM "ATRIUM" REFERS
TO ATRIUM COMPANIES, INC. (THE PREVIOUS REGISTRANT) PRIOR TO THE
RECAPITALIZATION AND REVERSE ACQUISITION OF WING. THE TERM DARBY REFERS TO R.G.
DARBY COMPANY, INC., TOTAL TRIM, INC. AND THEIR DIRECT PARENT DOOR
HOLDINGS, INC., AS A COMBINED ENTITY, WHICH ENTITIES WERE CONTRIBUTED TO THE
COMPANY AND BECAME SUBSIDIARIES IN CONNECTION WITH THE RECAPITALIZATION.

    ALL REFERENCES TO PRO FORMA ASSUME THAT THE ACQUISITIONS EFFECTED DURING
1999 OF DELTA MILLWORK, INC. ("DARBY-SOUTH"), HEAT, INC. ("HEAT") AND CHAMPAGNE
INDUSTRIES, INC. ("CHAMPAGNE") DESCRIBED IN "RECENT DEVELOPMENTS" AND THE
"RECAPITALIZATION" EFFECTED IN 1998 DESCRIBED IN "SELECTED FINANCIAL DATA" AND
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" OCCURRED ON JANUARY 1, 1998 AND THE FINANCIAL DATA IS THAT OF THE
COMPANY, DARBY-SOUTH, HEAT AND CHAMPAGNE FOR THE YEARS ENDED DECEMBER 31, 1999
AND 1998.

THE COMPANY

    We are one of the largest manufacturers and distributors of residential
windows and doors in the United States based on 1999 pro forma net sales. We
offer a complete product line including aluminum, vinyl and wood windows and
doors to our customers, which include leading national homebuilders and home
center retailers such as Del Webb, Centex, The Home Depot and Lowe's. We have
grown rapidly through a combination of internal growth and by making
complementary acquisitions.

    We were founded in 1948 and have become one of the two largest manufacturers
and suppliers of residential non-wood windows and the third largest manufacturer
and supplier of residential doors in the United States based on 1999 pro forma
net sales. Our portfolio of products includes some of the industry's most
recognized brand names including ATRIUM-Registered Trademark- and
WING-Registered Trademark-.

    We have 58 manufacturing facilities and distribution centers strategically
located in 24 states to service customers on a nationwide basis. We distribute
through multiple channels including direct distribution to large homebuilders
and independent contractors, one-step distribution through home centers and
lumberyards and two-step distribution to wholesalers and dealers who
subsequently resell to lumberyards, contractors and retailers. We believe that
our multi-channel distribution network allows us to reach the greatest number of
end customers and provide nationwide service to those customers.

    Our company is vertically integrated with operations that include:

    - The extrusion of aluminum and vinyl, which is utilized internally in our
      fabrication operations or sold to third parties;

    - The manufacture and assembly of window and door units, including
      pre-hanging of doors, and sale of such units to wholesalers, lumberyards,
      home centers and homebuilders;

    - A turn-key installation program in which we supply and install many of our
      products, including windows and interior and exterior doors; and

    - The sale of finished products to homebuilders, remodelers and contractors
      through company-owned distribution centers located across the country.

                                       3
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PRODUCTS

    We are one of a few window and door manufacturers that offer a diversified
product line that consists of a full range of aluminum and vinyl windows and
wood interior, exterior and patio doors. Our full product line allows us to
differentiate ourselves from our competition, leverage our distribution system
and be well-positioned to benefit from shifts in product preference. As
significant regional product preferences exist among aluminum, vinyl and wood, a
full product line is important to serve a national customer base effectively. We
estimate that approximately 60% of our 1999 pro forma sales were derived from
the sale of windows, approximately 37% from the sale of doors, and approximately
3% from the sale of other products and services.

    WINDOWS.  Our window products include sliders, double hung, and casement
products and are sold under the ATRIUM-Registered Trademark-,
CHAMPAGNE-REGISTERED TRADEMARK-, THERMAL-REGISTERED TRADEMARK-, BEST
BUILT-REGISTERED TRADEMARK-, KEL-STAR-Registered Trademark- and HR brand names.
We sell our windows primarily to building contractors and lumberyards through
direct and one-step distribution.

    The demand for our aluminum and vinyl products vary by region:

    - ALUMINUM--Aluminum windows are the product of choice in the southern
      United States due to the region's warmer weather and more value-conscious
      customers. Aluminum is the most appropriate fenestration material for the
      region because it provides less thermal efficiency at a lower cost than
      either vinyl or wood.

    - VINYL--Demand for vinyl windows, particularly in colder climates, has
      significantly increased over the last five years as vinyl windows have
      gained acceptance as a substitute for wood windows. This trend has been
      strengthened as prices for vinyl windows have become more competitive with
      wood products and durability and energy efficiency have improved. We
      entered the vinyl window market in mid-1995 and have increased sales of
      vinyl windows by leveraging the ATRIUM brand name and our distribution
      channels and through acquisitions.

    DOORS.  We estimate that our revenues from the sale of doors in 1999,
represented approximately 6% of the total U.S. door market. We estimate that
approximately 90% of our door sales in 1999 were generated from interior doors
and 10% from exterior doors. Our door products are sold under the
ATRIUM-Registered Trademark-, WING-Registered Trademark- and SUPER
MILLWORK-Registered Trademark- brand names. We sell our doors primarily to home
center retailers through one-step distribution.

    - INTERIOR DOORS--There are two broad categories of interior doors: bi-fold
      doors and passage doors. Bi-fold doors are hinged folding doors and
      passage doors are the traditional doors used to connect rooms. There are
      also two types of interior wood bi-fold doors and passage doors: solid
      wood doors and hollow core doors. Solid doors are made completely of wood
      while hollow core doors consist of two door facings glued to a wood frame
      and are hollow on the inside. Both solid wood and hollow core passage
      doors are sold one of two ways, either as slabs or as pre-hung units.
      Slabs refer to the door itself and pre-hung units refer to slab doors
      already hinged to a door frame at the factory.

    - EXTERIOR DOORS--Our exterior door product offering consists primarily of
      patio doors and pre-hung wood and steel entry doors.

    We estimate that approximately 45% of our 1999 door sales were generated
from the sale of pre-hung doors, 30% from solid wood doors, 10% from hollow core
doors and 15% from patio doors. We estimate that approximately 60% of all
passage doors sold through home center retailers are sold as pre-hung units,
mainly because of the ease of installation for the do-it-yourself consumer. We
are one of the few vertically-integrated companies that both manufactures and
pre-hangs the doors. We believe that sales of our pre-hung door line will
continue to grow and will represent a larger portion of our total door sales in
the future.

                                       4
<PAGE>
    OTHER PRODUCTS AND SERVICES.  We also manufacture and distribute other
products, including cafe doors, shutters, columns, decking products and patio
enclosures. We manufacture two types of cafe doors as well as louvered shutters.
The shutters can be used both for interior and exterior applications. Columns
come in many styles and are purchased from domestic suppliers. The deck & dock
products are made of vinyl and serve as an alternative to the more traditional
wood counterpart. The enclosures are custom built to any size and are made from
aluminum and vinyl product.

    We also offer a turnkey total installation program in which we supply and
install all interior doors, exterior doors, mouldings, locks, hardware, wire
shelving, bath accessories, plate glass mirrors, and toilet partitions. This
concept allows a developer to transfer the risk associated with retaining
reliable work crews and provides protection from cost overruns. We believe that
developers view this as a value added service and are willing to pay a premium
price for it.

SALES, MARKETING AND DISTRIBUTION

    One of the key components of our marketing strategy is to capitalize on the
complementary nature of our distribution channels. Historically, the majority of
our revenues of window business have been derived from sales to remodelers,
homebuilders, lumberyards and wholesalers, while through our door business we
have targeted principally home center retailers. We continue to broaden our
product offerings principally by selling doors to our traditional window
customers and windows to our traditional door customers.

    We have a multi-channel distribution network that includes direct, one-step
and two-step distribution as well as 32 company-owned distribution centers. Our
distribution strategy maximizes our market penetration and reduces reliance upon
any one distribution channel for the sale of our products. Furthermore, as a
manufacturer and distributor of windows and doors for more than four decades, we
have developed long-standing relationships with key distributors in each of our
markets. In each instance, we seek to secure the leading distributors in each
market. If we cannot secure a top-tier distributor in a desired geographic
market, we will consider an acquisition or start up of our own distribution
center in such market.

    We also sell to major home center retailers and smaller regional-based
retail centers. Although these have become more important to us because they
target the repair and remodeling market, they still accounted for less than
one-third of our total sales in 1999. One of our goals is to continue to
increase our window business' market share in the repair and remodeling market
by capitalizing our door business' strong relationship with home center
retailers.

    We utilize the following distribution channels:

    - Direct Distribution:  We sell our windows and doors directly to
      contractors, remodelers and other homebuilders without the use of an
      intermediary. By selling directly to builders, we are able to increase our
      gross profits while at the same time offering builders more favorable
      pricing.

    - One-Step Distribution:  We sell our finished windows directly to
      lumberyards, building products distributors, home centers, and
      company-owned distribution centers, which will then sell to contractors,
      homebuilders or remodelers. While it is not required that lumberyards or
      building products distributors carry our products on an exclusive basis,
      it is not unusual for them to do so. In addition, they generally purchase
      based on orders, keeping little or no inventory. One-step distribution
      tends to be used most often in metropolitan areas.

    - Two-Step Distribution:  Two-step distribution is the selling of completed
      doors and windows to a wholesaler or distributor who then sells the
      products to lumberyards, building products retailers and home centers.
      These intermediaries will in turn sell the windows and doors to the
      homebuilders, homeowners or remodelers. The wholesalers and distributors
      tend to maintain product inventory in order to service the needs of their
      client base for small quantities. Essentially, these middlemen sell to
      customers who do not guarantee sufficient volume to purchase directly from
      us. Two-step

                                       5
<PAGE>
      distribution is more common in rural areas since urban areas are serviced
      by home centers and large lumberyards.

    - Company-Owned Distribution Centers:  We maintain company-owned
      distribution facilities in key markets where available independent
      distributors are weak or where we have been unable to make adequate
      arrangements with existing distributors. Company-owned distribution
      centers essentially act as one-step distributors.

    To enhance our market coverage and leverage our considerable brand equity,
we currently market our windows and patio doors under primarily four brand
names, ATRIUM-REGISTERED TRADEMARK-, KEL-STAR-REGISTERED TRADEMARK-,
THERMAL-REGISTERED TRADEMARK- and H-R WINDOWS. Due to the fact that we enjoy
such significant national name recognition at both the building trade and
consumer levels, we decided to bring the product lines of almost all our other
brands under the ATRIUM-REGISTERED TRADEMARK- name. We are currently in the
process of rolling our CHAMPAGNE-REGISTERED TRADEMARK- and BEST BUILT-REGISTERED
TRADEMARK- product lines into the ATRIUM-REGISTERED TRADEMARK- brand. We have
completed rolling our SKOTTY and BISHOP product lines, as well as those from the
Gentek and Masterview acquisitions in 1997 and 1999, respectively, into the
ATRIUM-REGISTERED TRADEMARK- brand. We expect to extend the ATRIUM-REGISTERED
TRADEMARK- brand to other products, as well as to appropriate product lines
acquired in the future.

    WINDOWS.  We market our window products through a sales force consisting of
approximately 100 company salaried and commissioned sales representatives and
approximately 125 independent commissioned sales representatives. Each of our
divisions is supported by a sales manager, direct sales representatives and
independent representatives. The sales managers coordinate marketing activities
among both company and independent representatives. Our sales representatives
focus primarily on direct sales to homebuilders, remodelers and contractors,
while independent sales representatives sell to home centers, lumberyards and
wholesalers. In general, independent sales representatives carry our window and
door products on an exclusive basis, although they may carry other building
products from other manufacturers.

    Our full product line has also been an asset to our sales force, especially
when we are exploring a new distribution channel opportunity. Window
distributors have come to recognize us as a WINDOW supplier, as opposed to an
ALUMINUM window supplier or a VINYL window supplier. The distributors frequently
do not buy the whole range of products since regional tastes vary and
distributors tend to work according to regions. However, these distributors
value our ability to provide these products should they ever demand them.

    We believe that customer service plays a key role in the marketing process.
On-time delivery of products, order fill rate, consistency of service and
flexibility in meeting changing customer requirements have made it possible for
us to build a large and loyal customer base that includes companies such as
Centex Homes, one of the nation's largest home-builders, and The Home Depot, the
nation's largest home center retailer.

    DOORS.  Our marketing strategy centers primarily on the fact that we can
supply home center retailers with our own complete line of wood doors. We are
the only company in the industry that is able to provide this convenience. The
"one-stop shopping" we provide enables retailers to reduce their transaction
costs, as they have to pay only one invoice, work with one sales representative,
and schedule the receipt of goods with only one company. Our goal is to be the
"preferred supplier" for the door aisle of home center retailers.

    Our pricing/product offering strategy focuses on offering the end consumer
lower price points without sacrificing profit margins. We have executed this
strategy in two steps. First, we have consolidated the current product offerings
in order to simplify the overall offering and reduce inventory levels. Second,
on the remaining product offerings, we offer good, better and best products to
the market. Certain of the products in the offering have been redesigned (with
particular emphasis on taking costs out of the products) in order to have an
offering with three distinct price points. This promotes more "trading up" to
our higher quality products by the customer and displays a complete product
line.

                                       6
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    For door sales we use an internal sales force. In addition, senior
executives are actively involved with both sales and customer service. This
group is segregated between national and regional accounts. Approximately 82% of
our door business sales are made to national retail home center chains.

    To assist the sales force and provide better service to its customers, we
have over 35 merchandising managers. The merchandising managers provide home
center retailers with in-store services such as product knowledge seminars,
store product resets (to straighten stock and fix displays), sales analysis and
in-store merchandising. They also work with the retailers to resolve claims
issues and to handle product returns. This is a significant advantage to us, as
it is a level of service very few suppliers can offer.

    Our promotional efforts are focused on the home center industry and its
customers. We offer cooperative advertising programs to certain of our major
customers, which gives us exposure in our customers' local media (e.g.,
newspaper, radio, television) and thus enabling us to generate sales at
individual locations. We also invest in in-store displays showing operating door
units and photographs of in-room settings in order to generate sales once
customers are in the stores. Product knowledge classes are frequently held to
inform store employees about the features and benefits of each product. Award
winning packaging and in-store signage are used to further general awareness
within the stores. We also offer retailers a video showing how quickly a
homeowner can install a bi-fold door using only basic hand tools.

OPERATIONS

    We manufacture and sell our windows through a vertically integrated process
that includes extrusion, fabrication and distribution. We realize many
operational and cost benefits from our vertically integrated window operations.
By extruding aluminum and vinyl components in-house, we are able to secure a
low-cost, reliable source of extrusions, control product quality and reduce
inventory levels. The integration of extrusion and fabrication operations gives
us significantly more control over our manufacturing costs. We continually work
to achieve cost savings through increased capacity utilization at our efficient
facilities, adoption of best practices, reduction of cost of materials,
rationalization of product lines and reduction of inventory.

    We continue to build on what we believe is our position as one of the
industry's lowest cost manufacturers. Because of the scale of our operations, we
are able to negotiate price concessions for our raw materials, including glass
and vinyl. This is an important consideration since total cost of new materials
typically comprises 45% to 50% of revenue.

    We have been manufacturing products in Texas since 1953 and today have seven
primary manufacturing facilities in the state. As home centers, such as The Home
Depot and Lowe's, have expanded throughout the country, we have strategically
established or acquired twelve new manufacturing operations in Alabama, Ohio,
New York, North Carolina, Pennsylvania, Illinois, Colorado, Washington, Florida
and Texas in order to serve these customers more efficiently. We believe we are
one of the only door suppliers which can service the home centers on a national
basis. As the home centers continue to expand into new markets, we expect to
open new facilities to serve these regions.

    As part of the integration of Wing and Atrium, the Atrium Wood patio door
division has merged its manufacturing, distribution and sales functions with
Wing. Due to the fact that both divisions sell over 80% of their products to the
Home Centers, significant benefits have been realized from the combination
between the sales and distribution functions of Atrium Wood and Wing. Both
service the same customers and distribute to the same retail locations.

INDUSTRY OVERVIEW

    In 1999, new construction spending in the United States totaled over $547
billion, of which residential and commercial spending totaled approximately $322
billion and $225 billion, respectively. Within the residential construction
market, new construction spending and remodeling and replacement spending
totaled approximately $240 billion and approximately $82 billion, respectively.
The residential construction market consists of single-family and multi-family
housing construction. In 1999, housing starts in the

                                       7
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United States totaled approximately 1.8 million, of which approximately
1.4 million were single-family homes and approximately 0.4 million were
multi-family homes. During 1999, approximately 90% of Atrium's window and door
sales were to the single-family housing construction market, and the remaining
10% of sales were to the multi-family housing construction market.

    We believe that, in 1999, United States residential window and door
expenditures were approximately $13.5 billion, of which new construction and
remodel and replacement expenditures represented approximately $5.7 billion and
$7.8 billion, respectively.

    The domestic window market has grown to more than approximately
60.6 million in unit sales in 1999, and has generally outpaced the growth in the
domestic building materials industry. The residential door market has grown more
than approximately 20% in sales over the last five years. According to F.W.
Dodge, the U.S. residential door market represents more than 60.4 million units
annually.

    WINDOWS.  The residential window industry can be divided into two end-use
segments: new construction (an estimated 20.6 million windows shipped in 1999)
and repair and remodeling (approximately 41.2 million windows sold in 1999). We
believe that the repair and remodeling segment will continue to experience
strong growth due to the strength of sales of existing homes and the increase in
the average age of homes from 23 years to 28 years in the last decade. We
believe the expected growth in this segment represents an especially attractive
opportunity to leverage existing relationships with the home center retailers.
The home center industry is one of the fastest growing retail sectors in the
United States. According to the National Home Center News, the U.S. retail home
improvement market is expected to grow from $150.0 billion in 1998 to over $170
billion by the year 2000.

    DOORS.  Demand for doors is derived from three principal segments: new
residential construction, repair and remodeling and commercial construction. We
are primarily affected by repair and remodeling expenditures as our products are
predominantly sold at home centers that cater to the "do-it-yourself" market and
to the smaller builders who principally do remodeling work. We estimate that
interior doors sold to the repair and remodeling segment constitute at least
one-third of all interior doors sold in the United States. We believe that the
repair and remodeling segment will continue to experience strong growth since
approximately three-quarters of total housing transactions are sales of existing
homes.

COMPETITION

    The residential window and door industry is highly fragmented. With few
exceptions, competitors are privately-owned, regional companies with sales under
$100 million. On a national basis we compete with a few national companies in
different regions, products, distribution channels and price points, but do not
compete against any single company across all of these areas. We compete with
various other companies in specific regions within each market.

- WINDOWS--ALUMINUM AND VINYL.  Our major competitors for the sale of aluminum
  windows are Reliant Building Products, Inc. and MI Home Products, Inc. In the
  vinyl window and door segment, there is no dominant manufacturer that operates
  on a national basis. Regional manufacturers that compete on a local and
  regional basis characterize the segment. Historically, demand for vinyl
  windows and doors has been concentrated in the cooler regions of the United
  States. Our major competitors for the sale of vinyl windows are SilverLine
  Building Products, Simonton Windows and Milgard Manufacturing Inc. In
  addition, we compete with a number of regional manufacturers that sell
  directly to repair and remodeling contractors.

- PATIO DOORS--WOOD.  In the wood patio door segment of the industry, two large
  manufacturers, Andersen Corporation and Pella Corporation, sell premium
  products on a national basis. Our wood patio doors are sold at a medium price
  point and primarily through home centers throughout the United States and
  direct to builders. We have many competitors at our price point in the wood
  window and door segment, including Kolbe & Kolbe Millwork Co. Inc. and Hurd
  Millwork Co. Inc.

                                       8
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    DOORS.  We estimate that approximately 60% of all interior passage doors
sold through home centers are pre-hung. We expect this percentage to grow due to
the convenience and ease of installation of pre-hung doors. The pre-hung door
industry is very fragmented and consists primarily of hundreds of small
companies that do not manufacture doors and who have annual sales of $10.0 to
$30.0 million each. These companies are finding it increasingly difficult to
compete due to their lack of manufacturing capability. Our key competitors are
Premdor, Inc. and Jeld Wen, both of which manufacture and pre-hang doors. Other
competitors include Steves and Sons and Haley Bros.

INFLATION AND RAW MATERIALS

    During the past several years, the rate of general inflation has been
relatively low and has not had a significant impact on our results of
operations. We purchase raw materials, including aluminum, glass, wood and
vinyl, that are subject to fluctuations in price that may not reflect the rate
of general inflation. These materials fluctuate in price based on supply and
demand. Historically, there have been periods of significant and rapid aluminum
and wood price changes, both upward and downward, with a concurrent short-term
impact on our operating margins. We historically mitigated the effects of these
fluctuations over the long-term by passing through price increases to our
customers and through other means. For example, we enter into forward
commitments for aluminum billet to hedge against price changes, see the
footnotes to our consolidated financial statements for the year ended
December 31, 1999. The primary raw materials used in the production of our
windows and doors are readily available and are procured from numerous
suppliers. Currently, wood is purchased through multiple sources from around the
world, with little dependence on one company or one country.

SEASONALITY

    The new home construction market and the market for external repairs and
remodeling in northern climates are seasonal, with increased related product
sales in the second and third quarters. The market for interior repairs and
remodeling in northern climates tends to grow in the first and fourth quarters.
Although this results in seasonal fluctuations in the sales of certain of our
products, the complementary nature of our window and door business' selling
seasons helps mitigate this seasonality.

CYCLICALITY

    Demand in the window and door manufacturing and distribution industry is
influenced by new home construction activity and the demand for repair and
remodeling. For the year ended December 31, 1999, we believe that approximately
42% of our pro forma sales were related to new home construction. Trends in the
housing sector directly impact our financial performance. Accordingly, the
strength of the U.S. economy, the age of existing home stock, job growth,
interest rates, consumer confidence and the availability of consumer credit, as
well as demographic factors, such as inter/intra-state migration of the U.S.
population have a direct impact on us. Cyclical declines in new housing starts
may adversely impact our business.

EMPLOYEES

    We employ approximately 4,200 persons, of whom approximately 4,120 are
employed at our manufacturing facilities and distribution centers and
approximately 80 are employed at corporate headquarters. Approximately 1,300 of
our hourly employees are covered by collective bargaining agreements. We entered
into collective bargaining agreements in 1998 with the United Needle and
Industrial Trade Employee Union, SWRJB, ACTWU, AFL-CIO-CLC, covering certain
employees at the Atrium Aluminum, H-R Windows, Atrium Wood and Extruders
manufacturing facilities. All of these collective bargaining agreements expire
in May, 2001. In addition, we have collective bargaining agreements with The
Sheet Metal International Association Local Union No. 54, due to expire on
September 30, 2001, for our Kel-Star operations and Local Union 2743, Southern
Council of Industrial Workers, Chartered By United Brotherhood of Carpenters and
Joiners of America, AFL/CIO, due to expire on October 6, 2001, for our

                                       9
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Woodville Extruders operations. There are no union affiliations in connection
with any of our other divisions. We believe that our relationship with our
employees is good.

BACKLOG AND MATERIAL CUSTOMERS

    We have no material long-term contracts. Orders are generally filled within
5 to 7 days of receipt. Our backlog is subject to fluctuation due to various
factors, including the size and timing of orders for our products and is not
necessarily indicative of the level of future revenue.

    Our sales to The Home Depot, Inc., a leading home center retailer
represented 26% and 42% of our net sales for the years ended December 31, 1999
and 1998, respectively.

GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS

    We are subject to numerous federal, state, local and foreign environment
statutes and regulations relating to, among other things, air and water quality,
the discharge of materials into the environment, the handling and disposal of
wastes or otherwise relating to safety, health and protection of the environment
issues. We do not expect ongoing compliance with such provisions to have a
material impact on our earnings or competitive position in the foreseeable
future. Additionally, no significant capital expenditures are anticipated
related to ongoing compliance with such provisions. However, the applicable
requirements under the law are subject to amendment, and to the imposition of
new, other, or additional requirements and to changing interpretations of
agencies or courts. We cannot assure that new, other or additional requirements
would not be imposed or that expenditures, including material expenditures,
would not be required to comply.

    We are involved in various stages of investigation and cleanup relative to
environmental protection matters, some of which relate to waste disposal sites.
The potential costs related to such matters and the possible impact thereof on
future operations have been assessed, and we believe that we have made adequate
provision for these costs such that they will have no material adverse effect
upon our financial condition or our operations. We cannot be certain that
significant capital expenditures will not become necessary for investigation and
cleanup of environmental conditions which are currently unknown.

    Prior to 1993, we received correspondence in which we were named as a
potentially responsible party of two Superfund sites, pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) or
comparable state service. In one instance, we have entered into a settlement and
in the other instance, the group of potentially responsible parties negotiated a
proposed redemption price which was approved by the relevent state agency and is
being reviewed by the United States Environmental Protection Agency. Based on
the actions to date, and our current insurance coverage, we believe that any
liability associated with the Superfund sites does not currently have or will
not have a material adverse effect on our financial condition, results of
operations or liquidity. However, because CERCLA provides for strict and
sometimes joint and several liability, we cannot determine with certainty that
the liabilities in question will not result in material expenditures in the
future.

THE (RECAPITALIZATION)

    On August 3, 1998, D and W Holdings, Inc. ("Parent or "D and W"), entered
into an Agreement and Plan of Merger (the "Merger Agreement") with Atrium
Corporation ("Corp"), the parent of the Company and securityholders revised
therein to acquire all of the outstanding capital stock of Corp for
$225.0 million, through a series of transactions (such transactions are referred
to as the "Recapitalization") described below. Corp owned 100% of the
outstanding capital stock of Atrium prior to the merger. In connection with the
merger, GE Investment Private Placement Partners II, a Limited Partnership
("GEIPPPII"), and Ardatrium L.L.C. ("Ardatrium") formed Parent by acquiring all
of its outstanding common stock for an aggregate purchase price of $50.0
million. GEIPPPII is a private equity partnership affiliated with GE
Investments, a wholly-owned investment management subsidiary of the General
Electric Company. Ardatrium is an affiliate of Ardshiel, Inc. ("Ardshiel"), a
private equity investment firm based in New York.

                                       10
<PAGE>
    The acquisition of Corp by Parent was effected through the merger on
October 2, 1998 of a merger sub, a wholly owned subsidiary of Parent, with and
into Corp (the "Merger") pursuant to the terms of the Merger Agreement. Prior to
the Merger, Parent contributed $50.0 million to Atrium Corp. in exchange for all
of its outstanding common stock. As a result of the Merger, Corp became a direct
wholly-owned subsidiary of Parent, and the Company became an indirect
wholly-owned subsidiary of Parent.

    In connection with the merger, GEIPPPII and an affiliate of Ardshiel
recapitalized Wing and Darby and contributed them to the Company. As a part of
the Recapitalization, GEIPPPII and Ardshiel contributed to the Company
$50.0 million from the sale of common stock of the Company's ultimate parent and
approximately $52.0 million in the implied asset value of the Wing and Darby
businesses.

RECENT DEVELOPMENTS

DELTA ACQUISITION

    On January 27, 1999, the Company acquired certain assets of Delta Millwork,
Inc. (subsequently renamed as R.G. Darby Company-South and Total
Trim, Inc.-South, together Darby-South), a privately held door pre-hanger
located in Orlando, Florida, for approximately $1,755, including fees and
transaction expenses of $155 and $200 to be paid upon the achievement of certain
financial targets. The Company financed the acquisition through its revolving
credit facility. The results of operations for the acquired business are
included in the Company's consolidated financial statements beginning
January 27, 1999.

HEAT ACQUISITION

    On May 17, 1999, the Company acquired Heat, Inc. ("Heat"), a privately held
vinyl and door company, and its subsidiaries with operations located in Yakima,
Washington (Best Built, Inc.) and Pittsburgh, Pennsylvania (Thermal Industries,
Inc.) for approximately $85,000, which included $679 of assumed indebtedness.
Additionally, a post closing adjustment of $4,095 was paid on May 17, 1999
related to the working capital and cash delivered in excess of the target
defined in the purchase agreement. The Company financed the acquisition with a
portion of the proceeds raised from the issuance of $175,000 Senior Subordinated
Notes due 2009 offering (see financial statement Note 4). The results of
operations for the acquired business are included in the Company's consolidated
financial statements beginning May 17, 1999.

CHAMPAGNE ACQUISITION

    On May 17, 1999, the Company acquired Champagne Industries, Inc., a
privately held vinyl and door company located in Denver, Colorado for
approximately $4,426, including assumed indebtedness, transaction fees and $500
to be paid upon achievement of certain financial targets. The Company financed
the acquisition with a portion of the proceeds raised in the $175,000 Senior
Subordinated Notes due 2009 offering (see financial statement Note 4). The
results of operations for the acquired business are included in the Company's
consolidated financial statements beginning May 17, 1999.

ELLISON ACQUISITION

    On March 29, 2000, the Company announced the signing of a definitive
purchase and sale agreement to acquire the assets of Ellison Window and Door and
the stock of Ellison Extrusion Systems, Inc. (collectively "Ellison") for a
combined purchase price of $125,000. The acquisition proceeds include
approximately $101,500 of cash, $500 of assumed indebtedness and $23,000 of
D and W stock. The cash portion of the acquisition will be funded through a
combination of approximately $78,500 of new equity from D and W in the form of
common equity and/or preferred stock with the remainder coming from an
additional borrowing on the Company's existing Credit Agreement.

                                       11
<PAGE>
TRADEMARKS AND PATENTS

    The Company has registered and nonregistered trade names and trademarks
covering the principal brand names and product lines under which its products
are marketed.

ITEM 2.  PROPERTIES

    Our operations are conducted at the owned or leased facilities described
below:

<TABLE>
<CAPTION>
                                                                            CAPACITY
                                                                            (SQUARE)    OWN/
LOCATION                                    PRINCIPAL USE                     FEET      LEASE
--------                   -----------------------------------------------  ---------   -----
<S>                        <C>                                              <C>         <C>
Dallas, Texas............  Fabrication of aluminum windows                    186,000   Lease
                           Fabrication of vinyl windows                        90,000   Lease
                           Fabrication of aluminum windows                    266,000   Lease
Irving, Texas............  Fabrication of aluminum windows                    148,600   Own
                           Fabrication of aluminum patio doors                110,000   Own
Greenville, Texas........  Manufacture of solid wood, patio doors, hollow
                           core bi-fold and passage doors and custom
                             doors; pre-hanging                               300,000   Lease
                           Manufacture of solid wood and hollow bi-fold
                             and passage doors; pre-hanging                   180,000   Lease
                           Warehouse facility                                  30,000   Lease
Carrollton, Texas........  Extrusion of vinyl                                  25,200   Lease
Woodville, Texas.........  Extrusion of aluminum                              120,000   Lease
                           Fabrication of aluminum windows and storm doors    180,000   Lease
Wylie, Texas.............  Extrusion of aluminum                              100,000   Lease
Mt.Pleasant, Texas.......  Door component manufacturing                       110,000   Lease
New Braunfels, Texas.....  Distribution of aluminum windows                    10,000   Lease
Allentown,                 Manufacture of hollow core bi-fold and passage
  Pennsylvania...........    doors; pre-hanging warehouse                     105,000   Lease
Las Vegas, Nevada........  Distribution of aluminum windows                    30,400   Lease
Phoenix, Arizona.........  Fabrication of aluminum windows and storm doors    220,000   Lease
Bridgeport,                Fabrication of vinyl windows
  Connecticut............                                                      75,000   Lease
Clinton, Massachusetts...  Fabrication of vinyl windows                        31,000   Own
Farmingdale, New York....  Distribution of vinyl windows                        6,000   Lease
Anaheim, California......  Fabrication of vinyl windows                        80,000   Lease
Salt Lake City, Utah.....  Distribution of vinyl windows                       10,000   Lease
Union City, California...  Distribution of vinyl windows                       10,000   Lease
Portland, Oregon.........  Distribution of vinyl windows                       10,000   Lease
Arlington, Washington....  Distribution of vinyl windows                        3,000   Lease
Yakima, Washington.......  Fabrication of vinyl windows                        58,000   Lease
Colorado Springs,          Distribution of vinyl windows
  Colorado...............                                                      15,000   Lease
Denver, Colorado.........  Fabrication of vinyl windows                       108,000   Lease
Florence, Alabama........  Door pre-hanging; warehouse                         60,000   Lease
Orlando, Florida.........  Door pre-hanging; warehouse                         50,000   Lease
Charlotte, North           Door pre-hanging; warehouse
  Carolina...............                                                      40,000   Lease
Hanover Park, Illinois...  Door pre-hanging; warehouse                         73,000   Lease
Solon, Ohio..............  Door pre-hanging; warehouse                         30,000   Lease
Alsip, Illinois..........  Distribution of vinyl windows                       17,337   Lease
Altoona, Pennsylvania....  Distribution of vinyl windows                        5,000   Lease
Arlington Heights,         Distribution of vinyl windows
  Illinois...............                                                      15,660   Lease
Baltimore, Maryland......  Distribution of vinyl windows                       16,400   Lease
</TABLE>

                                       12
<PAGE>

<TABLE>
<CAPTION>
                                                                            CAPACITY
                                                                            (SQUARE)    OWN/
LOCATION                                    PRINCIPAL USE                     FEET      LEASE
--------                   -----------------------------------------------  ---------   -----
<S>                        <C>                                              <C>         <C>
Beltsville, Maryland.....  Distribution of vinyl windows                        5,685   Lease
                           Distribution of vinyl windows                        7,540   Lease
Cheektowaga, New York....  Distribution of vinyl windows                       10,000   Lease
Cincinnati, Ohio.........  Distribution of vinyl windows                       10,000   Lease
                           Distribution of vinyl windows                       10,830   Lease
Columbus, Ohio...........  Distribution of vinyl windows                       11,250   Lease
Detroit, Michigan........  Distribution of vinyl windows                        4,800   Lease
East Hartford,             Distribution of vinyl windows
  Connecticut............                                                       5,000   Lease
East Syracuse, New         Distribution of vinyl windows
  York...................                                                       8,250   Lease
Marietta, Georgia........  Distribution of vinyl windows                        7,000   Lease
Mechanicsburg,
  Pennsylvania...........  Distribution of vinyl windows                        3,988   Lease
Murrysville,               Fabrication of vinyl windows
  Pennsylvania...........                                                     166,000   Own
Nashville, Tennessee.....  Distribution of vinyl windows                        5,500   Lease
Philadelphia,              Distribution of vinyl windows
  Pennsylvania...........                                                      17,000   Own
Pittsburgh,                Extrusion of vinyl
  Pennsylvania...........                                                      65,000   Lease
Pittsburgh,                Fabrication of deck/dock product
  Pennsylvania...........                                                      30,000   Lease
Pittsburgh,                Enclosure assembly, showroom, and distribution
  Pennsylvania...........  of vinyl windows                                    33,788   Lease
Richmond, Virginia.......  Distribution of vinyl windows                        5,000   Lease
Spring Hill, Florida.....  Distribution of vinyl windows                       10,000   Lease
St. Louis, Missouri......  Distribution of vinyl windows                       10,100   Lease
Wilmington,                Distribution of vinyl windows
  Massachusetts..........                                                       5,688   Lease
</TABLE>

    We maintain our corporate headquarters in Dallas, Texas. The facility
provides approximately 17,500 square feet and is leased for a seven-year term
expiring in 2004.

    We believe that our manufacturing plants are generally in good operating
condition and are adequate to meet future anticipated requirements.

ITEM 3.  LEGAL PROCEEDINGS

    We are involved from time to time in litigation arising in the ordinary
course of our business, none of which is expected to individually have a
material adverse effect on us.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    Not applicable.

                                       13
<PAGE>
                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    There is no established public trading market for the Company's outstanding
equity securities.

ITEM 6.  SELECTED FINANCIAL DATA

    The selected income statement data set forth below for the year ended
December 31, 1995, the periods ended October 25, 1996 and December 31, 1996 and
the years ended December 31, 1997, 1998 and 1999, and the selected balance sheet
data at December 31, 1995, 1996, 1997, 1998 and 1999 were derived from the
audited consolidated financial statements of Atrium as described further below.
The selected historical financial data should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the financial statements, related notes and other financial
information included elsewhere in this 10-K.

    Prior to October 2, 1998, Atrium's historical financial statements as filed
with the Securities and Exchange Commission included its operations and the
operations of its subsidiaries. On October 2, 1998, pursuant to the
Recapitalization, D and W contributed the assets of Wing and Darby to the
Company.

    As Wing was determined to be the acquiror in the reverse acquisition, the
historical financial statements of "Atrium" (the previous registrant) were
replaced with the historical financial statements of Wing. As a result, the
statement of operations for 1998 only includes the operations of the Company and
Darby from October 3, 1998. The statements of operations for the year ended
December 31, 1997, only include the operations and accounts of Wing and its
predecessor, Wing was acquired by the current controlling shareholders on
October 25, 1996. Additionally, the operations of Delta Millwork, Inc. (renamed
R.G. Darby Company-South and Total Trim, Inc.-South, together, "Darby-South")
are included since the date of acquisition, January 27, 1999 and the operations
of Heat, Inc. ("Heat") and Champagne Industries, Inc. ("Champagne") are included
since their date of acquisition, May 17, 1999. The December 31, 1999 balance
sheet includes the accounts of the Company, Wing, Darby, Darby-South, Heat,
Champagne and each of their respective subsidiaries, while the December 31, 1998
balance sheet includes the accounts of the Company, Wing, Darby and each of
their respective subsidiaries.

<TABLE>
<CAPTION>
                                              PREDECESSOR
                                      ---------------------------
                                                        PERIOD         PERIOD
                                       YEAR ENDED        ENDED         ENDED        YEAR ENDED     YEAR ENDED     YEAR ENDED
                                      DECEMBER 31,    OCTOBER 25,   DECEMBER 31,   DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                          1995           1996           1996           1997           1998           1999
                                      -------------   -----------   ------------   ------------   ------------   -------------
                                                                       (DOLLARS IN THOUSANDS)
<S>                                   <C>             <C>           <C>            <C>            <C>            <C>
INCOME STATEMENT DATA:
  Net sales.........................     $68,481        $62,880       $ 13,200       $ 99,059      $ 211,059       $ 498,456
  Income (loss) before income taxes
    and extraordinary charge........         491          1,789            532          1,391         (2,329)         10,795
  Net income (loss).................         279          1,119            303            696         (2,819)          2,218
BALANCE SHEET DATA (END OF PERIOD):
  Total assets......................     $18,515        $19,966       $ 36,404       $ 55,383      $ 359,869       $ 484,136
  Total debt........................       8,522          8,154         20,489         32,238        179,227         316,711
OTHER DATA:
  EBITDA(1).........................     $ 2,374        $ 3,014       $  1,166       $  5,836      $  14,732       $  55,394
  Depreciation and
    amortization(2).................         844            716            260          1,492          7,980          14,189
  Interest expense..................       1,039            509            374          2,953          9,081          28,524
CASH FLOWS PROVIDED BY (USED IN):
  Operating activities..............     $ 3,409        $   664       $  1,112       $  1,148      $ (10,253)          8,835
  Investing activities..............      (1,667)          (934)       (29,265)       (11,763)      (125,184)       (108,480)
  Financing activities..............      (1,876)            69         28,193         10,609        135,403         100,939
</TABLE>

------------------------------

(1) EBITDA represents income before interest, income taxes, extraordinary
    charge, depreciation and amortization, special charges, stock option
    compensation expense and certain non-recurring expenses related to one-time
    expenses. While EBITDA is not intended to represent cash flow from
    operations as defined by GAAP and should not be considered as an indicator
    of operating performance or an alternative to cash flow or operating income
    (as measured by GAAP) or as a measure of liquidity, it is included herein to
    provide additional information with respect to the ability of Atrium to meet
    its future debt service, capital expenditures and working capital
    requirements. See "Management's Discussion and Analysis of Financial
    Condition and Results of Operations." Atrium believes EBITDA provides
    investors and analysts in the building materials industry the necessary
    information to analyze and compare historical results of Atrium on a
    comparable basis with other companies on the basis of operating performance,
    leverage and liquidity. However, as EBITDA is not defined by GAAP, it may
    not be calculated or comparable to other similarly titled measures within
    the building materials industry.

(2) Includes expense related to non cash stock option compensation expense.

                                       14
<PAGE>
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

    The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements of the Company (after the Recapitalization)
which appears elsewhere in this 10-K.

CERTAIN FORWARD-LOOKING STATEMENTS

    This 10-K contains certain forward-looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995) that involve
substantial risks and uncertainties relating to the Company that are based on
the beliefs of the management. When used in this 10-K, the words "anticipate",
"believe", "estimate", "expect", "intend", and similar expressions, as they
relate to the Company or the Company's management, identify forward-looking
statements. Such statements reflect the current views of the Company with
respect to the risks and uncertainties regarding the operations and results of
operations of the Company as well as its customers and suppliers, including as a
result of the availability of consumer credit, interest rates, employment
trends, changes in levels of consumer confidence, changes in consumer
preferences, national and regional trends in new housing starts, raw material
costs, pricing pressures, shifts in market demand, and general economic
conditions. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions or estimates prove incorrect, actual results may
vary materially from those described herein as anticipated, believed, estimated,
expected or intended.

                      ATRIUM (AFTER THE RECAPITALIZATION)

    Prior to October 2, 1998, Atrium's historical financial statements as filed
with the Securities and Exchange Commission included its operations and the
operations of its subsidiaries. On October 2, 1998, pursuant to the
Recapitalization, D and W contributed the assets of Wing and Darby to the
Company.

    As Wing was determined to be the acquiror in the reverse acquisition, the
historical financial statements of "Atrium" (the previous registrant) were
replaced with the historical financial statements of Wing. As a result, the
statement of operations for 1998 only includes the operations of the Company and
Darby from October 3, 1998. The statements of operations for the year ended
December 31, 1997, only include the operations and accounts of Wing and its
predecessor. Wing was acquired by the current controlling shareholders on
October 25, 1996. Additionally, the operations of Delta Millwork, Inc. (renamed
R.G. Darby Company-South and Total Trim, Inc.-South, collectively,
"Darby-South") are included since the date of acquisition, January 27, 1999 and
the operations of Heat, Inc. ("Heat") and Champagne Industries, Inc.
("Champagne") are included since their date of acquisition, May 17, 1999. The
December 31, 1999 balance sheet includes the accounts of the Company, Wing,
Darby, Darby-South, Heat, Champagne and each of their respective subsidiaries,
while the December 31, 1998 balance sheet includes the accounts of the Company,
Wing, Darby and each of their respective subsidiaries.

                                       15
<PAGE>
RESULTS OF OPERATIONS (IN THOUSANDS, EXCEPT PERCENTAGES)

    The following table sets forth for the periods indicated, information
derived from the Company's consolidated statements of operations expressed as
percentage of net sales.

<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31,
                                                              ------------------------------------
                                                                1999          1998          1997
                                                              --------      --------      --------
<S>                                                           <C>           <C>           <C>
Net sales...................................................   100.0%        100.0%        100.0%
Cost of goods sold..........................................    68.4          75.4          79.0
                                                               -----         -----         -----
Gross profit................................................    31.6          24.6          21.0
Selling, delivery, general and administrative expenses......    21.7          18.8          15.8
Amortization expense........................................     1.7           1.0           0.8
Non cash stock option compensation expense..................     0.1           1.8            --
Special charges.............................................     0.4            --            --
                                                               -----         -----         -----
Income from operations......................................     7.8           2.9           4.4
Interest expense............................................     5.7           4.3           3.0
Other income, net...........................................     0.1           0.3            --
                                                               -----         -----         -----
Income (loss) before income taxes and extraordinary
  charge....................................................     2.2          (1.1)          1.4
Provision (benefit) for income taxes........................     1.3          (0.1)          0.7
                                                               -----         -----         -----
Income (loss) before extraordinary charge...................     0.8          (1.0)          0.7
Extraordinary charge, net of income tax benefit.............     0.4           0.3            --
                                                               -----         -----         -----
Net income (loss)...........................................     0.4%         (1.3)%         0.7%
                                                               =====         =====         =====
</TABLE>

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

    NET SALES.  Net sales increased by $287,397 from $211,059 in 1998 to
$498,456 in 1999, or approximately 136.2%. Net sales in 1999, increased
principally as a result of the Recapitalization and the acquisitions of Darby
South, Heat and Champagne, as well as higher sales volume. The Recapitalization
contributed an increase of $204,296 from Atrium (previous registrant) and Darby
due to increased sales volumes and inclusion for the entire year of 1999, as
opposed to the inclusion since the Recapitalization on October 2, 1998. Atrium's
(previous registrant) sales volume grew approximately $13,622, or 5.8%. This
increase included approximately $18,374 from its aluminum and vinyl window
operations, or a 8.7% growth rate, offset by a decline of $4,752, or 22.7% from
its wood patio door operations due to the Company's efforts to eliminate
less-profitable sales territories. Darby grew $1,782, or 8.4% in 1999.
Additionally, the acquisitions of Darby-South, Heat and Champagne increased net
sales by $77,628 during 1999. These acquisitions grew $13,021, or 14.1% in 1999.
Net sales at Wing increased 3.7% over prior year due to increased sales to the
large home center retail chains. Excluding the loss of sales of $4,680 from the
bankruptcy of a significant customer (Hechinger), sales would have increased
$10,118, or 7.4%.

    COST OF GOODS SOLD.  Cost of goods sold decreased from 75.4% of net sales
during 1998 to 68.4% of net sales during 1999. The decrease was largely due to
the addition of Atrium (previous registrant) and Darby, which operate at higher
margins then Wing, since they were included in operations from October 2, 1998.
Additionally, the acquisitions of Darby-South, Heat and Champagne improved the
percentage as these divisions had a combined cost of goods sold as a percent of
net sales of 60.7% and 60.8% in 1999 and 1998, respectively. If Atrium (previous
registrant), Darby and the 1999 acquisitions were included for the entire years
of 1999 and 1998, cost of goods sold would have been 68.1% and 68.7%,
respectively. This improvement was primarily the result of favorable aluminum
prices from forward commitments partially offset by slightly higher vinyl and
wood prices. In the year 2000, the rising cost of vinyl resin (due to increasing
oil prices) and aluminum prices are expected to adversely impact cost of sales
percentages. This situation should be mitigated as price increases are
implemented over the next several quarters. Had all year-end inventory values
been stated on a FIFO basis, year-end inventory would have been approximately
$37 lower in 1999, $112 lower in 1998 and $97 higher in 1997. Overall, changes
in the cost of products sold

                                       16
<PAGE>
as a percentage of net sales for one period as compared to another period may
reflect a number of factors, including changes in the relative mix of products
sold and, the effects of changes in sales prices, material costs and changes in
productivity levels.

    SELLING, DELIVERY, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, delivery,
general and administrative expenses increased $68,026 from $39,754 (18.8% of net
sales during 1998) to $107,780 (21.6% of net sales during 1999). The increase
was primarily due to the inclusion of Atrium (previous registrant), Darby,
Darby-South, Heat and Champagne for a full year during 1999, and an increase in
sales volume. If Atrium (previous registrant), Darby and the 1999 acquisitions
were included for the entire years of 1999 and 1998, selling, delivery, general
and administrative expenses would have been 22.3% of net sales during 1999 and
21.3% of net sales during 1998, with the increase being primarily contributed to
Wing.

    Selling expenses increased from 4.4% of net sales during 1998 to 6.2% of net
sales during 1999. The increase was primarily due to a 0.8% point increase at
Wing and the acquisitions Heat and Champagne, which have higher selling
expenses. The increase was partially offset by a 0.3% point decrease in selling
expenses as a percent of net sales at the Atrium (previous registrant) due to
various cost saving measures which were implemented during 1999. If Atrium
(previous registrant), Darby and the 1999 acquisitions were included for the
entire years of 1999 and 1998, selling expenses would have been 7.0% and 6.7% of
net sales, respectively. The increase over prior year is primarily attributed to
increases in salaries of the new merchandising managers at Wing and cooperate
advertising allowances at Atrium Wood which are fixed at the beginning of the
year and do not vary with sales levels. Due to the elimination of certain sales
territories, sales volume declined and a corresponding increase as a percent of
sales occurred.

    General and administrative expenses increased from 5.6% of net sales during
1998 to 7.9% of net sales during 1999. The increase was primarily due to a 2.4%
point increase at Wing and the acquisitions Darby-South, Heat and Champagne,
which have higher general and administrative expenses than Atrium (previous
registrant). The increase was partially offset by a 0.6% point decrease in
general and administrative expenses as a percent of net sales at Atrium
(previous registrant) due to sales volume increases without any incremental
fixed costs. If Atrium (previous registrant), Darby and the 1999 acquisitions
were included for the entire years of 1999 and 1998, general and administrative
expenses would have been 8.1% and 7.4% of net sales, respectively. This increase
was primarily attributable to a $750 charge to bad debt expense at Wing related
to the bankruptcy of a significant customer (Hechinger).

    Delivery expenses decreased from 8.8% of net sales during 1998 to 7.5% of
net sales during 1999. The decrease was primarily due to a 0.8% point decrease
at the Atrium (previous registrant) and the acquisitions Darby-South, Heat and
Champagne, which have significantly lower delivery expenses than the Company and
Wing. If Atrium (previous registrant), Darby and the 1999 acquisitions were
included for the entire years of 1999 and 1998, delivery expenses would have
increased slightly to 7.3% of net sales during 1999, primarily due increases in
fuel cost, and 7.2% of net sales during 1998.

    AMORTIZATION EXPENSE.  Amortization expense increased $6,584 from $2,133
during 1998 to $8,717 during 1999. The increase was primarily due to the
continued amortization of the goodwill recorded in connection with the
Recapitalization and amortization of the new goodwill related to the
acquisitions of Darby-South, Heat and Champagne, which was $1,151 during 1999.

    NON CASH STOCK OPTION COMPENSATION EXPENSE.  Non cash stock option
compensation expense decreased $3,723from $3,851 in 1998 to $128 in 1999. In
1998, compensation expense was recorded for the options issued in connection
with the Recapitalization. In 1999, the Company recorded expense related to the
Company's variable options, under which expense is recorded as the value of the
options appreciate.

    SPECIAL CHARGE.  The company recorded a one-time charge of $1,886 for
severance benefits and related expenses incurred in connection with the
separation agreement entered into by the Company and the former President and
Chief Executive Officer.

                                       17
<PAGE>
    INTEREST EXPENSE.  Interest expense increased $19,443 from $9,081 during
1998 to $28,524 during 1999. The increase in interest expense was due primarily
to an increase in the average outstanding debt related to the $175 million
10 1/2 Senior Subordinated Notes due 2009 issued during the year. Additionally,
interest expense included the amortization of the deferred financing costs
recorded in connected with the Notes.

    EXTRAORDINARY CHARGE.  Extraordinary charge increased from $639 during 1998
to $1,936 during 1999. Extraordinary charge in 1999 consisted of the write-off
of deferred financing costs of $896 and the payment of a tender premium of
$2,182 in connection with the issuance of the Senior Subordinated Notes, the
paydown of Term Loan B and the retirement of the 10 1/2 Senior Subordinated
Notes due 2006. This amount is net of income tax benefit of $1,142.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

    NET SALES.  Net sales increased by $112,000 from $99,059 in 1997 to $211,059
in 1998. The increase was due primarily to a combined increase in net sales of
$87,909 from the addition of the Company and Darby in connection with the
Recapitalization in October 1998 and the acquisition of Super Millwork in
November 1997. Additionally, net sales at Wing increased 24.3% due to the
increase in sales to the large home center retail chains.

    COST OF GOODS SOLD.  Cost of goods sold decreased from 79.0% of net sales
during 1997 to 75.4% of net sales during 1998. The decrease was due largely to
the addition of the Company and Darby in the fourth quarter of 1998, as these
divisions operate at higher margins than Wing. Excluding the effects of the
change in the LIFO reserve, cost of goods sold would have been 75.5% of net
sales in 1998 and 78.9% in 1997.

    SELLING, DELIVERY, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, delivery,
general and administrative expenses increased $24,083 from $15,671 (15.8% of net
sales during 1997) to $39,754 (18.8% of net sales during 1998). The increase was
primarily due to the inclusion of selling, delivery, general and administrative
expenses of Super Millwork for twelve months and the Company and Darby for
three months. Additionally, selling and delivery expenses increased due to the
increase in net sales. The increase in selling, delivery, general and
administrative expenses as a percentage of net sales is due largely to the
addition of the Company and Darby, as these expenses represent a greater
percentage of net sales at the Company and Darby than Wing.

    AMORTIZATION EXPENSE.  Amortization expense increased $1,359 from $774
during 1997 to $2,133 during 1998. The increase was largely due to the
amortization of goodwill recorded in connection with the Recapitalization.

    NON CASH STOCK OPTION COMPENSATION EXPENSE.  Stock option compensation
expense increased $3,851 from $0 during 1997 to $3,851 during 1998. Stock option
compensation expense consisted of $2,813 representing the difference between the
fair market value of common stock of D and W and the exercise price associated
with a warrant granted to an executive of the Company in connection with the
Recapitalization, charges associated with previously issued stock options at
exercise prices below the fair value of the underlying common stock and charges
associated with certain variable options.

    INTEREST EXPENSE.  Interest expense increased $6,128 from $2,953 during 1997
to $9,081 during 1998. The increase in interest expense was due primarily to an
increase in average outstanding debt related to the loans issued and Senior
Subordinated Notes due 2006 assumed in connection with the Recapitalization. In
addition, interest expense included the amortization of deferred financing costs
recorded in connection with the Recapitalization.

    EXTRAORDINARY CHARGE.  Extraordinary charge increased $639 from $0 during
1997 to $639 during 1998. Extraordinary charge represents the write-off of
certain deferred financing costs incurred in the placement

                                       18
<PAGE>
of Wing's debt, which was repaid in connection with the Recapitalization. This
amount is net of income tax benefit of $392.

LIQUIDITY AND CAPITAL RESOURCES

    Cash generated from operations and availability under the Revolving Credit
Facility ("Revolving Facility") are the Company's principal sources of
liquidity. During 1999, cash was primarily used in connection with the
acquisitions of Darby-South, Heat and Champagne and for capital expenditures.
Net cash provided by operating activities was $8,835 during 1999 compared to
cash used in operating activities of $10,253 during 1998. The increase in cash
provided by operations was primarily attributable to an increase in net income
and an increase in inventories. Cash flows from financing activities decreased
from cash provided of $125,184 during 1998 to $108,480 during 1999. The decrease
was due primarily to borrowings and contributions from Corp. made in connection
with the Recapitalization in 1998.

OTHER CAPITAL RESOURCES

    In connection with the Recapitalization, the Company entered into a Credit
Agreement providing for a Revolving Facility in the amount of $30,000, which was
increased to $40,000 in June 1999, of which $5,000 is available under a letter
of credit sub-facility. The Revolving Facility has a maturity date of June 30,
2004. At December 31, 1999, the Company had $20,096 of availability under the
Revolving Facility, net of borrowings of $15,270 and outstanding letters of
credit totaling $4,634.

CAPITAL EXPENDITURES

    The Company had net cash capital expenditures of $8,111 during 1999,
compared to $2,209 and $1,355 during 1998 and 1997, respectively. The 1998
capital expenditures are exclusive of the Recapitalization. The increase is
largely due to the addition of the Company and Darby for the last three months
of 1998 and Darby-South, Heat and Champagne during 1999. The Company expects
capital expenditures (exclusive of acquisitions) in 2000 to be approximately
$11,000, however, actual capital requirements may change, particularly as a
result of acquisitions the Company may make. Capital expenditures exclude costs
related to the implementation of the Company's new management information system
which include internally capitalized costs.

    The ability of the Company to meet its debt service and working capital
obligations and capital expenditure requirements is dependent, however, upon the
future performance of the Company and its subsidiaries which, in turn, will be
subject to general economic conditions and to financial, business and other
factors, including factors beyond the Company's control. As of March 30, 2000,
the Company had $20,060 available for borrowings under the Revolving Facility,
net of borrowings of $15,500 and outstanding letters of credit totaling $4,440.

INFLATION, TRENDS AND GENERAL CONSIDERATIONS

    The Company has evaluated and expects to continue to evaluate possible
acquisitions on an ongoing basis and at any given time may be engaged in
discussions or negotiations with respect to acquisition candidates. The
Company's performance is dependent to a significant extent upon the levels of
new residential construction, residential replacement and remodeling and
non-residential construction, all of which are affected by such factors as
interest rates, inflation and unemployment. In the near term, the Company
expects to operate in an environment of relatively stable levels of construction
and remodeling activity. However, increases in interest rates could have a
negative impact on the level of housing construction and remodeling activity.
The demand for the Company's products is seasonal, particularly in the Northeast
and Midwest regions of the United States where inclement weather during the
winter months usually reduces the level of building and remodeling activity in
both the home improvement and new construction markets. The Company's lower
sales levels usually occur during the first and fourth

                                       19
<PAGE>
quarters. Since a high percentage of the Company's manufacturing overhead and
operating expenses are relatively fixed throughout the year, operating income
and net earnings tend to be lower in quarters with lower sales levels. In
addition, the demand for cash to fund the working capital of the Company's
subsidiaries is greater from late in the first quarter until early in the fourth
quarter.

MARKET RISK

    The Company is exposed to market risks related to changes in interest rates
and commodity pricing. The Company uses derivative financial instruments on a
limited basis to hedge economic exposures. The Company does not enter into
derivative financial instruments or other financial instruments for speculative
trading purposes.

INTEREST RATE RISK

    The Company is exposed to market risk from changes in interest rates
primarily through its investing and borrowing activities. In addition, the
Company's ability to finance future acquisition transactions may be impacted if
the Company is unable to obtain appropriate financing at acceptable interest
rates. The Company manages its borrowing exposure to changes in interest rates
by utilizing a combination of fixed and variable rate debt instruments. In
addition, as of December 31, 1999, the Company hedged its exposure on a portion
of its variable rate debt by entering into interest rate swap agreements to lock
in a fixed rate. At December 31, 1999, approximately 56% of the carrying values
of the Company's long-term debt were either at fixed interest rates or covered
by interest rate swap agreements that fixed the interest rates.

    The following table presents principal cash flows of variable rate debt by
maturity date and the related average interest rate. The table also presents the
notional amount of the swaps and their expected future interest rates. The
notional amount is used to calculate the contractual payments to be exchanged.
The interest rates are weighted between the various loans based on debt
outstanding and are estimated based on implied forward rates using a yield curve
at December 31, 1999.

                   EXPECTED MATURITIES (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                         2000       2001       2002       2003       2004     THEREAFTER    TOTAL     FAIR VALUE
                       --------   --------   --------   --------   --------   ----------   --------   ----------
<S>                    <C>        <C>        <C>        <C>        <C>        <C>          <C>        <C>
LIABILITIES
Variable--rate
  debt...............  $17,270     $2,000     $2,000     $2,000     $2,000     $118,430    $143,700    $143,700
Average interest
  rate...............    10.45%     10.74%     10.76%     10.85%     10.95%       11.14%         --          --
INTEREST RATE
  DERIVATIVES
Notional amount......  $   563         --         --         --         --           --    $    563         563
Average pay rate.....     6.50%        --         --         --         --           --          --          --
Average receive
  rate...............     7.06%        --         --         --         --           --          --          --
Notional amount......       --         --         --     $2,498         --           --    $  2,498       2,524
Average pay rate.....     6.25%      6.25%      6.25%      6.25%        --           --          --          --
Average receive
  rate...............     7.06%      7.35%      7.38%      7.47%        --           --          --          --
</TABLE>

                                       20
<PAGE>
    At December 31, 1998, long-term debt included variable-rate debt of
$149,548, which approximated its fair value, with an average interest rate of
10.6%. The Company also had two interest rate swaps outstanding as follows:

<TABLE>
<CAPTION>
                                                            SWAP #1    SWAP #2
                                                            --------   --------
<S>                                                         <C>        <C>
Notional amount...........................................    $563      $2,498
Fair value................................................     563       2,524
Average pay rate..........................................    6.50%       6.25%
Average receive rate......................................    7.06%       7.31%
</TABLE>

COMMODITY PRICING RISK

    The Company is subject to significant market risk with respect to the
pricing of its principal raw materials, which include, among others, plastics,
resins, glass, wood and aluminum. If prices of these raw materials were to
increase dramatically, the Company may not be able to pass such increases onto
its customers and, as a result, gross margins could decline significantly. The
Company manages its exposure to commodity pricing risk through purchasing
aluminum forward commitments. The following is information related to aluminum
forward commitments at December 31, 1999:

<TABLE>
<S>                                                           <C>
FORWARD COMMITMENTS, EXPECTED TO MATURE DURING 2000
Contract volumes:
  Fixed prices..............................................     12,800,000pounds
  Floating prices...........................................     62,013,000pounds
Contract amount.............................................        $10,321
Fair value..................................................        $11,281
</TABLE>

YEAR 2000 DISCLOSURE

    The following Year 2000 statements constitute a Year 2000 Readiness
Disclosure within the meaning of the Year 2000 Information and Readiness
Disclosure Act of 1998.

    As of March 30, 2000, none of the Company's subsidiaries had experienced any
significant Year 2000 related problems. There have been no instances where
mission-critical and non-mission-critical systems have failed to perform
correctly. However, the Year 2000 issue still poses several potential risks to
the Company and its subsidiaries. A number of the Company's customers and
suppliers (third parties) utilize computers and computer software to varying
degrees in conjunction with the operation of their businesses. The customers and
suppliers of those businesses may utilize computers as well. Should the
Company's customers and suppliers, or the businesses on which they depend
experience any Year 2000 related computer problems, such third parties' cash
flow could be disrupted, adversely affecting their ability to pay the Company,
if a customer, or, if a supplier, their ability to pay their suppliers for goods
needed to supply the Company. Such disruptions could have adverse affects on the
Company and its subsidiaries. The Company assessed its Year 2000 third party
exposure through the use of questionnaires and personal interviews during 1999.
As of March 30, 2000, the Company was not aware of any supply or credit problems
related to the Year 2000 issue.

    Should Year 2000 related problems occur which cause any of the systems of
certain third parties upon which the Company and its subsidiaries depends become
inoperative, increased personnel costs could be incurred if additional staff is
required to perform functions that the inoperative systems would have otherwise
performed. As of March 30, 2000, the Company had not experienced any disruptions
of third party services related to the Year 2000 issue.

    The Company's expenditures for remediation directly related to correcting
Year 2000 issues were approximately $2,000, including businesses acquired in
1999. The total expenditures of approximately

                                       21
<PAGE>
$2,000 consisted of approximately $1,500 of IT computer hardware equipment costs
and approximately $500 of IT software and non-IT computer hardware expenditures.
All of the Company's Year 2000 compliance expenditures have been funded from the
Company's operating cash flow.

    The Company's Year 2000 compliance budget does not include significant
amounts for hardware replacement because the Company has historically employed a
strategy to continually upgrade its computer systems. Consequently, the
Company's Year 2000 compliance budget has not required the diversion of funds
from or the postponement of the implementation of other planned IT projects.

    The Company believes it is not possible to estimate the potential lost
revenue due to the remaining potential Year 2000 problems discussed above as the
occurrence, extent and longevity of such potential problems cannot be predicted.
As of March 30, 2000 the Company believes that it has not experienced any lost
revenue related to the Year 2000 issue.

FINANCIAL ACCOUNTING STANDARDS

    In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" amended by SFAS
No. 137 "Accounting for Derivative Instruments and Hedging Activities--Deferral
of the Effective Date of FAS No. 133--Amendment of FAS No. 133" (combined
"SFAS 133"). SFAS 133 establishes accounting and reporting standards requiring
that every derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as either an asset
or liability measured at its fair value. SFAS 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company must formally
document, designate and assess the effectiveness of transactions that receive
hedge accounting.

    SFAS 133 is effective for fiscal years beginning after June 15, 2000. A
company may also implement the Statement as of the beginning of any fiscal
quarter after issuance (that is, fiscal quarters beginning June 16, 1999 and
thereafter). SFAS 133 cannot be applied retroactively. SFAS 133 must be applied
to (a) derivative instruments and (b) certain derivative instruments embedded in
hybrid contracts that were issued, acquired, or substantively modified after
December 31, 1997 (and, at the Company's election, before January 1, 1998).

    The Company is in the process of quantifying the impacts of adopting
SFAS 133 on its financial statements and has not determined the timing of or
method of adoption of SFAS 133.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    The financial statements are listed in the accompanying Index to Financial
Statements on page F-1 of this report.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

    Not applicable.

                                       22
<PAGE>
                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    The following table provides information concerning the directors and the
executive officers of D and W and its subsidiaries.

<TABLE>
<CAPTION>
NAME                                          AGE                       POSITION
----                                        --------                    --------
<S>                                         <C>        <C>
Frank E. Sheeder..........................     56      Chief Executive Officer and Director
Jeff L. Hull..............................     34      President, Chief Financial Officer,
                                                       Treasurer and Director
R.L. Gilmer...............................     46      Executive Vice President, Chief Operating
                                                       Officer and Director, Divisional
                                                       President--Wing Industries, Inc.
Louis W. Simi, Jr.........................     59      Executive Vice President of Operations of
                                                       Atrium
Robert E. Burns...........................     34      Sr. Vice President of Operations of Atrium
Cliff Darby...............................     35      Divisional President--R.G. Darby
                                                       Company, Inc. and Total Trim, Inc.
Eric W. Long..............................     31      Vice President, Corporate Controller and
                                                       Secretary
Sam A. Wing, Jr...........................     76      Chairman Emeritus and Director
Daniel T. Morley..........................     47      Chairman of the Board of Directors
James G. Turner...........................     31      Vice President and Director
Roger A. Knight...........................     40      Director
Andreas Hildebrand........................     32      Director
John Deterding............................     68      Director
Nimrod Natan..............................     36      Director
</TABLE>

    Frank E. Sheeder joined D and W and Atrium effective March 28, 2000. Prior
to joining the Company, Mr. Sheeder served as Chief Operating Officer of Zurn
Industries, Inc. from 1995 to 1999. Mr. Sheeder also served as Chief Executive
Officer of Eljer Industries, Inc. from 1997 to 1998. Prior to Zurn and Eljer,
Mr. Sheeder served in various capacities with GAF Corporation and General
Electric.

    Jeff L. Hull has served as President of D and W and Atrium since
August 1999 and as Director since April 1999 and Chief Financial Officer and
Treasurer from April 1996. Prior to that, Mr. Hull managed the asset/liability
department of AmVestors Financial Corporation (NYSE:AMV) from June 1995. From
1990 to 1995, he was an audit manager with the accounting firm of Deloitte &
Touche. Mr. Hull is a certified public accountant.

    R.L. Gilmer has served as Executive Vice President of D and W and Atrium
since April 1999 and as the Chief Operating Officer and Director of D and W and
Atrium since October 1998. Mr. Gilmer has also served as President of Wing
Industries from October 1996. Prior to that, he was Vice President of Wing from
July 1993 to October 1996. Mr. Gilmer has served Wing in various capacities
since 1986 including as Controller and Manufacturing Manager. Prior to joining
Wing, Mr. Gilmer was a certified public accountant with the accounting firm of
Arthur Andersen & Co.

    Louis W. Simi, Jr. has served as Executive Vice President since 1993 and
General Manager of our Atrium Aluminum division from 1971 to 1998. Mr. Simi also
served as Director of Atrium from July 1995 to November 1996. He has served in
other capacities with us and our subsidiaries since 1966.

    Robert E. Burns joined Atrium in January 2000 as Senior Vice President of
Operations. Prior to that Mr. Burns was Vice President of Operations of Baldwin
Hardware, a division of Masco Corp. from March 1996. Prior to joining Masco,
Mr. Burns was a management consultant with Universal Scheduling Company for six
years.

                                       23
<PAGE>
    Cliff Darby has served as President of Darby since 1993 and has worked for
Darby since 1988, overseeing operations and sales for Darby and Total
Trim, Inc.

    Eric W. Long has served as Vice President since April 1999, as Secretary
since March 2000 and as Corporate Controller of Atrium since April 1996. Prior
to April 1999, Mr. Long served as Assistant Secretary of Atrium from April 1996.
From April 1995 to April 1996, Mr. Long was a financial analyst with Applebee's
International. From 1991 to 1995, he was with the accounting firm of Deloitte
& Touche L.L.P. Mr. Long is a certified public accountant.

    Sam A. Wing, Jr. has served as Chairman Emeritus and Director of D and W
since October 1998. Mr. Wing has served Wing in various capacities since 1946,
including as Chairman Emeritus from 1996 until October 1998, as Chairman and
Chief Executive Officer of Wing from 1995 until 1996 and as Chairman of Wing
from 1994 until 1995. Prior to that, Mr. Wing was Chairman and Chief Executive
Officer of Wing from 1969 to 1994.

    Daniel T. Morley has served as Chairman of the Board of Directors of D and W
since October 1998. Mr. Morley has served as President of Ardshiel since 1997
and Chairman of WIH since 1996 and Door since January 1998. Mr. Morley also
serves as Chairman of Astro Textiles, Inc. and Koala Holdings, Inc, privately
held companies.

    James G. Turner has served as Vice President and Director of D and W and
Atrium since October 1998. Mr. Turner has served as a Principal of Ardshiel
since June 1997. Mr. Turner has also served as a Director of Wing since
October 1997 and Door since December 1997. From March 1994 until June 1997,
Mr. Turner worked as an Associate for Ardshiel. Prior to that, Mr. Turner worked
for Chemical Banking Corp. Mr. Turner is also a Director of Avanti
Petroleum, Inc. and several other privately held companies.

    Roger A. Knight has served as a Director of D and W since October 1998.
Mr. Knight has served as a Principal of Ardshiel since May 1998. Prior to
joining Ardshiel, he was Managing Director and a member of Coopers & Lybrand
Securities, Inc., the wholly-owned investment banking subsidiary of Coopers &
Lybrand L.L.P. (now known as PricewaterhouseCoopers LLP).

    Andreas Hildebrand has served as a Director of D and W since October 1998.
Mr. Hildebrand is Vice President--Private Equities of GE Investments.
Mr. Hildebrand also served as a Director of Wing since October 1997 and of Darby
since January 1998. He has served in other capacities with GE Investments during
the past five years. Mr. Hildebrand is also a Director of Eagle Family Foods
Holdings, Inc.

    John C. Deterding has served as Director of D and W since October 1998.
Mr. Deterding has been the owner of Deterding Associates, a real estate
consulting company, since June 1993. From 1975 until June 1993, he served as
Senior Vice President and General Manager of the Commercial Real Estate division
of General Electric Capital Corporation ("GECC"). From November 1989 to June
1993, Mr. Deterding served as Chairman of the General Electric Real Estate
Investment Company, a privately held REIT. He served as Director of GECC
Financial Corporation from 1986 to 1993.

    Nimrod Natan has served as a Director of D and W since October 1998.
Mr. Natan has served as a Principal of Ardshiel since 1997. Mr. Natan also
serves as a director of Wing and Astro Holdings, Inc., a privately held company.
Prior to joining Ardshiel in 1997, Mr. Natan was a management consultant with
Gemini Consulting for four years.

                                       24
<PAGE>
ITEM 11.  EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION AND OTHER INFORMATION

    COMPENSATION OF NAMED EXECUTIVE OFFICERS.  The following table provides
certain summary information for each of the years ended December 31, 1997, 1998
and 1999 concerning compensation paid or accrued by us to or on behalf of the
Chief Executive Officer and the four other most highly compensated persons
functioning effectively as our executive officers whose individual combined
salary and bonus exceeded $100,000 during such period (the "Named Executive
Officers"):

<TABLE>
<CAPTION>
                                                ANNUAL COMPENSATION             LONG-TERM
                                        ------------------------------------   COMPENSATION
                                                                OTHER ANNUAL    SECURITIES     ALL OTHER
                                         SALARY      BONUS      COMPENSATION    UNDERLYING    COMPENSATION
NAME AND PRINCIPAL POSITION    YEAR       ($)         ($)          ($)(1)        OPTIONS#         ($)
---------------------------  --------   --------   ----------   ------------   ------------   ------------
<S>                          <C>        <C>        <C>          <C>            <C>            <C>
Jeff L. Hull ..............    1999     $250,000   $  150,000    $       --        425,000     $       --
  President, Chief             1998      155,000      175,000            --      1,183,842             --
  Financial Officer and        1997      120,000       20,000            --          5,000         15,146(2)
  Treasurer

R.L. Gilmer ...............    1999      225,000       83,500            --             --             --
  Executive Vice President,    1998      215,000       56,250            --      1,183,842             --
  Chief Operating Officer      1997      138,679       70,000            --             --             --

Louis W. Simi, Jr. ........    1999      170,000      110,000            --             --             --
  Executive Vice President     1998      170,000      185,000            --        250,000        662,923(3)
  of Operations                1997      125,000      250,690            --             --        106,025(2)

Cliff Darby ...............    1999      156,000      135,000            --             --             --
  Divisional President--       1998      150,000       76,000            --        832,314             --
  R.G. Darby Company, Inc.     1997      150,000       66,000            --             --             --
  and Total Trim, Inc.

*Randall S. Fojtasek ......    1999       87,500            0     1,750,000(4)   5,735,369      3,802,809(4)
  President and Chief          1998      350,000    3,140,000            --             --      2,542,570(3)
  Executive Officer            1997      350,000      125,000            --                       308,928(2)
</TABLE>

------------------------

*   Resigned effective March 31, 1999.

   Frank Sheeder joined the Company as Chief Executive Officer effective
    March 28, 2000. Accordingly, no compensation was paid in 1999. See
    "Employment Agreements."

(1) Perquisites related to automobile and expense allowances are excluded since
    the aggregated amounts are the lesser of $50,000 or 10% of the total annual
    salary.

(2) Amounts represent fees received in connection with the termination of the
    purchase and sale agreement to acquire PlyGem Industries, Inc.

(3) In connection with a change of control transaction, certain members of
    management were granted options at below fair market prices. Accordingly,
    compensation expense is being recognized for financial statement purposes.
    Upon completion of the 1998 Recapitalization and the exercise of these
    options, the compensatory portion of the options were reflected in the
    individual's wages and in our financial statements.

(4) In connection with Mr. Fojtasek's resignation in March 1999, he was paid
    accrued severance of approximately $1.8 million and through the cancellation
    of warrants an additional $3.8 million was paid to terminate the said
    warrants.

                                       25
<PAGE>
    OPTION GRANTS DURING 1999.  The following table sets forth option grants to
the Named Executive Officers during the year ended December 31, 1999.

<TABLE>
<CAPTION>
                                         INDIVIDUAL GRANTS
                        NUMBER OF    --------------------------                POTENTIAL REALIZABLE VALUE AT
                        SECURITIES    % OF TOTAL                               ASSUMED ANNUAL RATES OF STOCK
                        UNDERLYING     OPTIONS                                 PRICE APPRECIATION FOR OPTION
                         OPTIONS      GRANTED TO    EXERCISE OR                           TERM(2)
                         GRANTED     EMPLOYEES IN   BASE PRICE    EXPIRATION   ------------------------------
NAME                       (#)       FISCAL YEAR      ($/SH)         DATE         5%($)             10%($)
----                    ----------   ------------   -----------   ----------   -----------        -----------
<S>                     <C>          <C>            <C>           <C>          <C>                <C>
Jeff L. Hull..........    200,000         6.7           1.10         7/1/09       145,912            364,049
                          150,000         5.1           1.25        10/1/09       114,282            287,774
                           75,000         2.5            .01        10/1/09        57,141            143,887
R.L. Gilmer...........         --          --             --             --            --                 --
Louis W. Simi, Jr.....         --          --             --             --            --                 --
Cliff Darby...........         --          --             --             --            --                 --
Randall S. Fojtasek...         --          --             --             --            --                 --
</TABLE>

------------------------

(1) All options are for the common stock of D and W Holdings, Inc..

(2) The assumed rates are compounded annually for the full terms of the options.

(3) Options vest ratably over the life of the respective employment contract,
    except for Simi and Darby, which vest ratably over five years and Hull's
    which vest daily over the life of his employment agreement.

    AGGREGATED OPTION EXERCISES AND FISCAL-YEAR-END OPTION VALUES.  The
following table sets forth option exercises by the Named Executive Officers and
value of in-the-money unexercised options held at December 31, 1999.

<TABLE>
<CAPTION>
                                                            NUMBER OF SECURITIES
                                                       UNDERLYING UNEXERCISED OPTIONS       VALUE OF UNEXERCISED IN-THE-
                          SHARES                                AT FY-END (#)                  MONEY OPTIONS AT FY-END
                       ACQUIRED ON        VALUE       ---------------------------------   ---------------------------------
NAME                   EXERCISE (#)    REALIZED($)    EXERCISABLE(1)   UNEXERCISABLE(1)   EXERCISABLE(2)   UNEXERCISABLE(2)
----                   ------------   -------------   --------------   ----------------   --------------   ----------------
<S>                    <C>            <C>             <C>              <C>                <C>              <C>
Jeff L. Hull.........         --      $       --         688,136         1,045,706           $359,876          $214,084
R.L. Gilmer..........         --              --         835,643           887,882            405,338           221,970
Louis W. Simi, Jr....         --              --         312,500           187,500            325,625            46,875
Cliff Darby..........         --              --         393,997           904,518             43,003           115,138
Randall S. Fojtasek..  5,735,369(3)    3,802,809(3)           --                --                 --                --
</TABLE>

------------------------

(1) Represents options held by the named individual to purchase common stock of
    D and W Holdings, Inc.

(2) Based on the fair market value of the option shares at fiscal year end
    ($1.25 per share) less the exercise price per share payable for such shares.

(3) Represents shares underlying warrants to purchase common stock of D and W
    Holdings, Inc. that were canceled and retired, upon Mr. Fojtasek's
    resignation.

1998 STOCK OPTION PLAN

    In connection with the 1998 Recapitalization, the Board of Directors and
stockholders of D and W adopted the D and W Holdings, Inc. 1998 Stock Option
Plan (the "1998 Plan") providing for the grant of options to purchase common
stock of D and W to key employees and eligible non-employees of D and W and its
subsidiaries. The 1998 Plan originally provided for the grant of options to
purchase up to 11,991,142 shares of D and W common stock. Upon consummation of
the acquisitions of Heat, Inc. and Champagne Industries, Inc., the 1998 Plan was
amended to increase the number of options to 14,991,142.

                                       26
<PAGE>
After the acquisitions and 1999 grants, 3,817,142 shares of D and W common stock
were reserved for future grants under the 1998 Plan. The 1998 Plan is
administered by the compensation committee of the Board of Directors of
D and W.

    The 1998 Plan provides that options may be granted in the form of incentive
options qualified for favorable tax treatment under Section 422 of the Internal
Revenue Code or in the form of non-qualified options, which do not qualify under
Section 422. All options granted are non-qualified options. Unless otherwise
provided by the compensation committee, options granted under the 1998 Plan
generally have a term of ten (10) years from the date of grant and vest in equal
installments annually over three to five years dependent on continued
employment. No option is exercisable until it has vested. Options granted upon
consummation of the 1998 Recapitalization in exchange for outstanding options of
Darby and Wing continue to vest on the schedule applicable to the exchanged
options. Of such options, options to purchase 371,138 shares of D and W common
stock were fully vested upon grant. Of the options granted in connection with
the 1998 Recapitalization, options to purchase 993,115 shares of D and W common
stock will vest only in connection with a value event, defined as:

    - the sale of D and W common stock by D and W in an offering registered with
      the SEC which constitutes a qualifying public offering,

    - D and W merging or consolidating with another corporation in a merger in
      which the surviving corporation has freely tradeable common stock, or

    - the sale or transfer of substantially all of the assets of D and W and its
      subsidiaries, taken as a whole.

    The exercise price of all options was set by the compensation committee upon
grant, and with respect to incentive options is at least equal to the fair
market value of the D and W common stock on the date of grant.

    Options are nontransferable other than in accordance with the laws of
descent and distribution. Unvested options will expire, unless otherwise
provided by the compensation committee, upon the optionee's death, disability or
termination of employment for any reason. Upon an optionee's death or disability
the optionee or his or her representative or heir will have the right to
exercise the vested portion of any options. Upon termination for cause or
voluntary termination by the optionee without good reason all vested options
will automatically expire. Upon termination of employment for any other reason,
including retirement or termination without cause, the optionee will have the
right to exercise the vested portion of any option. Also, upon termination of an
optionee's employment for any reason, D and W will have the right to purchase
outstanding options and any shares of D and W common stock held by the optionee
as a result of the exercise of an option.

REPLACEMENT STOCK OPTION PLAN

    In addition to the 1998 Plan, D and W adopted the D and W Holdings, Inc.
Replacement Stock Option Plan (the "Replacement Plan") to govern the terms of
certain options to purchase D and W common stock which were granted in
replacement of outstanding options of Atrium Corp. in connection with the 1998
Recapitalization. Under the Replacement Plan, options to purchase an aggregate
of 1,575,000 shares of D and W common stock were granted in exchange for
outstanding options of Atrium Corp. which were not cashed out in the 1998
Recapitalization. In connection with the acquisitions of Heat, Inc. and
Champagne Industries, Inc., the Replacement Plan was amended increased the
number of shares available to 2,575,000. The options granted pursuant to the
Replacement Plan vest ratably over periods ranging from three to five years on
each anniversary date of the grant. The replacement options have exercise prices
ranging from $0.01 to $0.16 per share. As of December 31, 1999, 374,469 shares
of D and W common stock were reserved for future grants under the Replacement
Plan.

                                       27
<PAGE>
    Upon termination of an optionee's employment, D and W shall have the right
to repurchase from the optionee all or any portion of their replacement option.
Upon exercise of any vested portion of a replacement option, D and W may require
the optionee to execute a buy-sell agreement containing provisions similar to
the repurchase provisions described above, as a condition to such option
exercise.

    The Replacement Plan provides that all options granted thereunder are in the
form of nonqualified options, which are options that do not qualify for favored
tax treatment under Section 422 of the Internal Revenue Code. The replacement
options have a term of 20 years from the date of grant subject to early
termination in connection with termination of employment. No option is
exercisable until it is vested. Replacement options are not transferable by an
optionee, either voluntarily, involuntarily or by operation of law, except that
options may be transferred to an optionee's family members or personal
representative, so long as the transferee agrees to be bound by the provisions
of an option agreement and replacement plan.

BONUS PLAN

    We maintain a bonus plan providing for annual bonus awards to certain key
employees. Such bonus amounts are based on the Company and its divisions meeting
certain performance goals established by our board of directors.

OTHER BENEFIT PROGRAMS

    Our executive officers also participate in other employee benefit programs
including health and dental insurance, group life insurance, long-term and
short-term disability, and a savings and supplemental retirement plan (the
"401(k) Plan") on the same basis as our other employees.

EMPLOYMENT AGREEMENTS

    Mr. Sheeder has entered into an employment agreement with D and W pursuant
to which he serves as Chief Executive Officer of D and W. Mr. Sheeder's
employment agreement has a four-year term, commencing March 28, 2000. Under the
terms of Mr. Sheeder's employment agreement, he is entitled to receive an annual
base salary of $325,000, subject to increase at the discretion of the Board of
Directors. The agreement provides that Mr. Sheeder may receive an annual
performance bonus of up to $325,000;

    - 75% of which will be payable contingent on achievement of D and W's EBITDA
      plan,

    - 25% of which will be payable contingent on achievement of management's
      objectives set by the Board of Directors.

    Pursuant to the agreement, Mr. Sheeder has received options to purchase
2,500,000 shares of D and W common stock pursuant to the stock option plan.
1,000,000 shares have a strike price of $1.25 and the remaining
1,500,000 shares have a strike price of $1.50. The options will vest annually in
equal installments over four years from the date of grant. The agreement also
provides that in the event Mr. Sheeder is terminated by D and W without cause,
or terminates his employment for good reason, D and W will pay to Mr. Sheeder a
payment

    - in a lump sum, an amount equal to the sum of his annual base salary earned
      or accrued through the termination date, reimbursement of his reasonable
      and necessary expenses, any unpaid accrued vacation pay and any amount
      arising from his benefits to be received pursuant to D and W's investment
      plans, plus

    - equal to a prorated portion of his incentive bonus, plus

    - equal to one-twelfth of his annual base salary on the date of termination
      together with 80% of his maximum incentive bonus for each month during a
      period of twenty-four months following the date of his termination.

                                       28
<PAGE>
    Such payments would also be made if Mr. Sheeder's employment is terminated
by D and W in connection with a change of control of D and W, as defined in the
agreement. Pursuant to the agreement, Mr. Sheeder agrees not to compete with
D and W and its subsidiaries until (i) one year following termination by
D and W for cause or due to disability or as a result of termination initiated
by him without good reason, or (ii) the last day of any period he is receiving
severance payments upon termination by D and W without cause or upon a change of
control, or as a result of termination initiated by him with good reason.

    Mr. Hull has entered into an employment agreement with D and W pursuant to
which he serves as President and Chief Financial Officer of D and W. Mr. Hull's
employment agreement has a three-year term, commencing in October 1999. Under
the terms of Mr. Hull's employment agreement, he is entitled to receive an
annual base salary of $250,000, subject to increase at the discretion of the
Board of Directors. The agreement provides that Mr. Hull may receive an annual
performance bonus of up to $150,000;

    - 50% of which will be payable contingent on achievement of D and W's EBITDA
      plan,

    - 50% of which will be payable contingent on achievement of management's
      objectives set by the Board of Directors.

    Pursuant to the agreement, Mr. Hull has received options to purchase
1,733,842 shares of D and W common stock pursuant to the stock option plan. The
options have various exercise prices ranging from $.01 to $1.25 per share,
subject to adjustment under the stock option plan, and will vest daily over
three and four years from the date of grant. The agreement also provides that in
the event Mr. Hull is terminated by D and W without cause, or terminates his
employment for good reason, D and W will pay to Mr. Hull a payment

    - in a lump sum, an amount equal to the sum of his annual base salary earned
      or accrued through the termination date, reimbursement of his reasonable
      and necessary expenses, any unpaid accrued vacation pay and any amount
      arising from his benefits to be received pursuant to D and W's investment
      plans, plus

    - equal to a prorated portion of his incentive bonus, plus

    - equal to one-twelfth of his annual base salary on the date of termination
      together with 80% of his maximum incentive bonus for each month during a
      period of twenty-four months following the date of his termination.

    Such payments would also be made if Mr. Hull's employment is terminated by
D and W in connection with a change of control of D and W, as defined in the
agreement. Pursuant to the agreement, Mr. Hull agrees not to compete with
D and W and its subsidiaries until (i) one year following termination by
D and W for cause or due to disability or as a result of termination initiated
by him without good reason, or (ii) the last day of any period he is receiving
severance payments upon termination by D and W without cause or upon a change of
control, or as a result of termination initiated by him with good reason.

    Mr. Gilmer has entered into an employment agreement with D and W pursuant to
which he serves as Chief Operating Officer of D and W. Mr. Gilmer's employment
agreement has a four year term, commencing in October 1998. Under the terms of
Mr. Gilmer's employment agreement, he is entitled to receive an annual base
salary of $225,000, as adjusted, subject to increase at the discretion of the
Board of Directors. The agreement provides that Mr. Gilmer may receive an annual
performance bonus of up to $125,000,

    - 75% of which will be payable contingent on achievement of D and W's EBITDA
      plan,

    - 15% of which will be payable contingent on achievement of management
      objectives set from time to time by the Board of Directors, and

    - 10% of which will be payable contingent on achievement of a target return
      on equity for D and W set by the Board of Directors.

                                       29
<PAGE>
    Pursuant to the agreement, Mr. Gilmer received options to purchase 1,723,524
shares of D and W common stock with exercise prices ranging from $.01 to $1.56.
These options vest annually in equal installments over 3 to 4 years. The
agreement also provides that, in the event Mr. Gilmer is terminated by D and W
without cause, or terminates his employment for good reason, D and W will pay to
Mr. Gilmer a payment

    - in a lump sum, an amount equal to the sum of his annual base salary earned
      or accrued through the termination date, reimbursement of his reasonable
      and necessary expenses, any unpaid accrued vacation pay and any amount
      arising from his benefits to be received pursuant to Holdings' investment
      plans, plus

    - an amount equal to a prorated portion of his incentive bonus, plus

    - an amount equal to one-twelfth of his annual base salary on the date of
      termination together with 80% of his maximum base incentive bonus for each
      month during a period of twelve months following the date of his
      termination.

    Such payments would also be made if Mr. Gilmer's employment is terminated by
D and W in connection with a change of control of D and W, as defined in the
agreement. Pursuant to the agreement, Mr. Gilmer agrees not to compete with
D and W and its subsidiaries until (i) one year following termination by
D and W for cause or due to disability or as a result of termination initiated
by him without good reason, or (ii) the last day of any period he is receiving
severance payments upon termination by D and W without cause or upon a change of
control, or as a result of termination initiated by him with good reason.

    We entered into an employment agreement with Mr. Simi on January 1, 1998.
The compensation provided to Mr. Simi includes an annual base salary of
$170,000, subject to increases at the discretion of the Board of Directors.
Additionally, Mr. Simi is eligible for an incentive bonus based on certain
performance targets.

    Mr. Simi's employment agreement terminates on December 31, 2000. If
Mr. Simi's employment with the Company is terminated by the Company for any
reason other than for cause, he will continue to be paid his salary for 12
months, together with the annual incentive bonus. Mr. Simi has agreed not to
compete with the Company in certain geographic areas for so long as the Company
pays salary to him.

    On January 9, 1998, Mr. Cliff Darby entered into an employment agreement
with Darby for a term commencing in January, 1998. Under the terms of
Mr. Darby's employment agreement, he is entitled to receive an annual base
salary of $156,000, as adjusted, subject to increase at the discretion of the
Board of Directors of Darby. Mr. Darby is entitled to annual performance bonus
payable upon the achievement of Darby's EBITDA plan. The agreement also provides
that in the event Mr. Darby is terminated by Darby without cause, as defined in
the agreement, Darby will pay to Mr. Darby a payment

    - in a lump sum equal to all compensation accrued and unpaid as of the date
      of termination, and

    - in equal semi-monthly installments, an amount equal to the compensation to
      which Mr. Darby would have been entitled under the agreement for a period
      of one year if the agreement had not been terminated.

    Pursuant to the agreement, Mr. Darby has agreed not to compete with the
business of Darby for a period of five years from the date of the agreement,
whether the agreement terminates prior to the end of such five year period;
provided that the non-competition covenant shall apply for one year following
termination without cause by Darby regardless of the date of termination.

TERMINATION AGREEMENTS

    On April 9, 1999, Randall S. Fojtasek, President and Chief Executive Officer
and Director of D and W, entered into an agreement and release with D and W,
Corp., the Company and certain subsidiaries of the Company parties thereto
(collectively, the Company"), Ardshiel, GE Investment Management Incorporated
and GEIPPPII whereby Mr. Fojtasek resigned as officer and director of the
Company, effective as of March 31, 1999.

                                       30
<PAGE>
    Pursuant to the agreement and release, the Company agreed to make certain
severance benefits payments to Mr. Fojtasek in connection with his resignation,
including a payment (i) in a lump sum of $1,625, (ii) in a lump sum, an amount
equal to the amount of Mr. Fojtasek's annual base salary accrued through the
termination date, reimbursement of his reasonable and necessary expenses, and
unpaid and accrued vacation pay and (iii) of an accrued investments arising from
Mr. Fojtasek's benefits to be received pursuant to D and W's investment plans.
Mr. Fojtasek agreed not to compete with the Company for a period of three years
from the termination date.

    In addition, in connection with his resignation, Mr. Fojtasek entered into a
warrant purchase agreement with D and W, Ardshiel, GE Investment Management
Incorporated and GEIPPPII, dated as of June 1999, pursuant to which D and W
repurchased from Mr. Fojtasek (i) a warrant, dated as of October 2, 1998, to
purchase 4,735,369 shares of D and W common stock and (ii) a warrant, dated as
of October 2, 1998, to purchase 1,000,000 D and W common stock, for the
aggregate purchase price of $3,803.

BOARD OF DIRECTORS

    COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

    Daniel T. Morley, and Andreas Hildebrand serve as members of our
    compensation committee.

    AUDIT COMMITTEE

    James G. Turner and Roger A. Knight serve as our audit committee.

    EXECUTIVE COMMITTEE

    James G. Turner, Roger A. Knight, Andreas Hildebrand, R.L. Gilmer and Jeff
    L. Hull serve as our executive committee.

    NON-EMPLOYEE DIRECTOR COMPENSATION

    Any member of our board of directors who is not an officer or employee does
    not receive compensation for serving on our board of directors. We may
    compensate non-employee directors not affiliated with GEIPPPII or Ardshiel
    in the future for their service on our board.

                                       31
<PAGE>
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    We are a wholly-owned subsidiary of Atrium Corporation, which in turn is a
wholly-owned subsidiary of D and W Holdings, Inc. The following table sets forth
certain information regarding the beneficial ownership of D and W common stock
as of March 30, 2000, by each person who owns beneficially more than 5% of the
outstanding common stock of D and W and by the directors and certain executive
officers of D and W. Unless otherwise indicated below, to our knowledge, all
persons listed below have sole voting and investment power with respect to their
shares of common stock of D and W.

<TABLE>
<CAPTION>
NAME                                                          NUMBER OF SHARES   PERCENTAGE
----                                                          ----------------   ----------
<S>                                                           <C>                <C>
GE Investment Private Placement Partners II, a Limited
  Partnership...............................................   92,970,561           95.2%
  3003 Summer Street
  Stamford, CT 06984-7900
Ardshiel, Inc...............................................    5,776,282(1)         5.9%
  230 Park Avenue, Suite 2527
  New York, NY 10169
Jeff L. Hull................................................      858,839(2)        *
R.L. Gilmer.................................................    1,171,509(2)         1.2%
Louis W. Simi, Jr...........................................      312,500(2)        *
Cliff Darby.................................................    1,730,621(2)         1.8%
Sam A. Wing, Jr.............................................           --             --
Daniel T. Morley............................................    5,776,282(3)         5.9%
James G. Turner.............................................           --             --
Roger A. Knight.............................................           --             --
Andreas Hildebrand..........................................           --             --
John Deterding..............................................           --             --
Nimrod Natan................................................           --             --
All directors and executive officers as a group
  (13 persons):.............................................   11,523,487           11.7%
</TABLE>

------------------------

*   less than 1%.

(1) Includes (i) 1,040,748 shares of D and W common stock issuable upon exercise
    of warrants that are currently exercisable; (ii) 1,819,033 shares of
    D and W common stock held by Ardatrium L.L.C., Arddoor L.L.C., Ardwing
    L.L.C. and Wing Partners, which are under common control with Ardshiel, and
    (iii) 2,916,501 shares of Holdings common stock held by certain other
    stockholders of D and W who have granted proxies to Ardshiel or its
    affiliates to vote their shares.

(2) Includes 858,839, 835,643 312,500 and 671,468 shares of D and W common stock
    issuable upon exercise of options granted to Messrs. Hull, Gilmer, Simi and
    Darby, respectively. Such options are exercisable within 60 days.

(3) Represents shares beneficially owned by Ardshiel and its affiliates.
    Mr. Morley is the President and a stockholder of Ardshiel and a managing
    member of Arddoor L.L.C., Ardatrium L.L.C. and Ardwing L.L.C., the general
    partner of Wing Partners. Accordingly, Mr. Morley may be deemed to be the
    beneficial owner of these shares. Mr. Morley disclaims beneficial ownership
    of these shares.

                                       32
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

THE STOCKHOLDERS AGREEMENT

    GEIPPPII, Ardshiel, and certain other stockholders of D and W (collectively,
the "Major Stockholders"), have entered into a stockholders agreement, dated as
of October 2, 1998, which affects their relative rights as stockholders of D and
W.

    Pursuant to the stockholders agreement, the Major Stockholders have agreed
that the authorized number of directors of D and W shall consist of up to nine
directors. GEIPPPII, so long as it is a stockholder, shall have the right to
designate one director in the event there are less then seven directors, and two
directors in the event the Board of Directors consists of seven or more members.
Ardshiel and its affiliates, shall be entitled to designate up to six directors.

    Subject to certain exceptions, each of the Major Stockholders other than
GEIPPPII has agreed not to sell, transfer or otherwise dispose of such
stockholder's equity securities of D and W and an affiliate of Ardshiel has
agreed not to sell, transfer or otherwise dispose of its Discount Debentures. In
the event that GEIPPPII intends to transfer its equity securities or Discount
Debentures, each of the other Major Stockholders or holders of Discount
Debentures, will be entitled to purchase a pro rata portion of the equity
securities or Discount Debentures held by such Major Stockholder or holder of
Discount Debentures. In the event such sale, transfer or disposition by GEIPPPII
occurs at any time following the fourth anniversary of the stockholders
agreement, the other stockholders or holders of Discount Debentures, upon notice
by GEIPPPII, will be obligated to sell all of their equity securities and/or all
of their Discount Debentures to the proposed transferee. Subject to certain
conditions, Ardshiel and its affiliates, may require that GEIPPPII, at
Ardshiel's or any of its affiliate's option, (i) sell or otherwise dispose of
its equity securities and Discount Debentures, in an arm's length transaction to
any person or persons who are not affiliates of Ardshiel or (ii) purchase all of
the other Major Stockholders' equity securities and Discount Debentures for a
purchase price provided in the stockholders agreement. In addition, subject to
certain exceptions, GEIPPPII and/or D and W have the right to purchase from any
selling Major Stockholder any or all equity securities proposed to be sold to a
third party by such selling Major Stockholder.

    Pursuant to the terms of the stockholders agreement, D and W has granted the
Major Stockholders the right to require D and W, under certain circumstances, to
register under the Securities Act of 1933 any or all shares of D and W common
stock then held by such Major Stockholder and the right, in the event D and W or
any of its subsidiaries proposes to file, subject to certain exceptions, a
registration statement under the Securities Act with respect to any common stock
or equity security, to include in such registration statement for resale by the
Major Stockholders, such Major Stockholder's common stock.

    The stockholders agreement provides that D and W cannot take certain
enumerated actions without obtaining the prior written consent of GEIPPPII.

MANAGEMENT AGREEMENT

    We are a party to a management agreement dated October 2, 1998, which was
amended on May 17, 1999, with D and W, Atrium Corp. and Ardshiel. Pursuant to
the management agreement, Ardshiel provides advice to D and W and its
subsidiaries with respect to business strategy, operations and budgeting and
financial controls in exchange for an annual fee of $1.8 million plus expenses.
The Company paid $1.9 million under this agreement in 1999. Additionally, the
management agreement provides that, prior to engaging another financial advisor
D and W or its subsidiary must offer Ardshiel the opportunity to perform
investment banking services in connection with a sale or purchase of a business
or any financing. Ardshiel has the right to receive a closing fee for any such
services which shall not be greater than 2% of the total purchase or sale price
for such business and will be payable upon consummation of such sale or such
purchase. The consent of GEIPPPII is required prior to the payment by D and W or
any of its subsidiaries of any closing fees to Ardshiel where D and W or any of
its subsidiaries is paying similar fees to other entities for similar services.
D and W paid a closing fee of approximately $1.4 million upon the

                                       33
<PAGE>
acquisitions of Delta Millwork, Inc., Heat, Inc. and Champagne Industries, Inc.
and paid Ardshiel's expenses in connection therewith. The management agreement
will remain in effect until October 2, 2008 and will be automatically renewed
for one-year periods unless either party gives written notice to the contrary at
least thirty days prior to the expiration of the initial or any extended term of
the agreement.

BUY-SELL AGREEMENTS

    D and W entered into buy-sell agreements with certain members of its
management pursuant to which D and W may, at its option, repurchase from those
persons all or any portion of their shares of D and W common stock upon the
termination of their employment. Each agreement provides that D and W shall
repurchase those shares at a purchase price equal to the greater of $1.00 per
share or the fair market value of the shares at the date of termination unless
the termination shall have been for cause, in which case the repurchase price
shall be equal to the lesser of the fair market value per share at the date of
termination and $1.00 per share. Each agreement also provides for certain
restrictions on transfer.

    In addition, the buy-sell agreements entered into with Messrs. Gilmer and
Darby provide that the manager will have the right to require D and W to
repurchase his shares if he is terminated for any reason other than for cause
and D and W does not exercise its right to purchase the shares.

THE DISCOUNT DEBENTURES

    In 1998, Atrium Corp. issued $80.6 million aggregate principal amount at
maturity of its Discount Debentures to GEIPPPII and an affiliate of Ardshiel
(representing $45.0 million in gross proceeds to Atrium Corp.), to fund a
portion of the 1998 Recapitalization.

    D and W has agreed to cause

    - us to make dividend payments to Atrium Corp. to enable it to make interest
      and principal payments on, or to repurchase, redeem or prepay, the
      Discount Debentures, to the extent we have funds legally available for the
      payment of such dividends and we are not prohibited from making such
      dividend payments by the terms of any contract to which we are a party
      (including, without limitation, the indenture relating to the Credit
      Facility). Presently, the Credit Facility restricts the Company's ability
      to pay dividends and

    - Atrium Corp., to the extent Atrium Corp. is not prohibited from doing so
      by the terms of any contract to which it or D and W is a party, to pay
      interest and principal on, or to repurchase, redeem or repay, the Discount
      Debentures from the proceeds of any such dividend payment.

    Subject to certain exceptions, an affiliate of Ardshiel has agreed not to
sell, transfer or otherwise dispose of its Discount Debentures. In addition,
such affiliate has certain rights and is subject to certain obligations in the
event of certain transfers by GEIPPPII of its Discount Debentures and is
entitled, under certain circumstances, to require GEIPPPII to sell or otherwise
dispose of its Discount Debentures and equity securities in an arm's length
transaction to any person or persons who are not affiliates of Ardshiel or
purchase such affiliate's Discount Debentures and equity securities. See "--The
Stockholders Agreement."

    On May 17, 1999, in connection with the issuance of the $175,000 of 10 1/2%
Senior Subordinated Notes due 2009, we utilized $21,500 of the net proceeds from
the issuance to pay a distribution to Atrium Corp. Atrium Corporation, in turn,
repaid $21,500 (of which $1,500 represented accretion of discount) of the
$45,000 Discount Debentures issued in connection with the October 2, 1998
Recapitalization.

INDEMNIFICATION AGREEMENTS

    We entered into indemnification agreements with Jeff L. Hull and Louis W.
Simi, Jr. under which we agreed to indemnify them to the fullest extent
permitted by law, and to advance expenses, if either of them becomes a party to
or witness or other participant in any threatened, pending or completed action,
suit or

                                       34
<PAGE>
proceeding by reason of any occurrence related to the fact that the person is or
was our, our subsidiary's or, at our request, another entity's director,
officer, employee, agent or fiduciary, unless a reviewing party (either outside
counsel or a director or directors appointed by the Board of Directors)
determines that the person would not be entitled to indemnification under
applicable law.

FACILITY LEASES

    On July 3, 1995, Fojtasek Industrial Properties, Ltd., a limited partnership
in which Randall S. Fojtasek, the former President and Chief Executive Officer,
owned an equity interest of approximately 10.2%, executed leases with us with
respect to our Atrium Wood, Atrium Vinyl and our H-R Windows division
facilities. Both leases were absolute net leases. These leases were extended on
October 1, 1997 for a period of ten years, expiring on July 1, 2008. The amounts
paid under these two leases totaled $1,323, $1,245, and $753 in 1999, 1998 and
1997, respectively. In November 1999, these facilities were sold to an
unaffiliated third-party. In connection with this sale, we negotiated a new
lease and terminated the lease with Fojtasek Industrial Properties, Ltd.
Additionally, Fojtasek Interests, a Texas corporation, in which Mr. Fojtasek
owns an interest, subleases approximately 1,500 square feet of office space at
our corporate headquarters. Amounts paid to us under this lease in 1999 were
$15. This sublease was terminated in September 1999.

    Darby is a party to a facilities lease agreement with R.G. Darby, a former
stockholder of Darby and the father of Cliff Darby, Divisional President of
Darby. Pursuant to the terms of the lease, Darby pays rent to Mr. Darby monthly,
adjusted annually for inflation. The term of the lease is fifteen years with
three extension terms of five years each. Rent expense paid to Mr. Darby in 1999
and 1998 was approximately $186 and $144, respectively.

                                       35
<PAGE>
                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are included in this report.

    (1) FINANCIAL STATEMENTS:

       The financial statements are listed in the accompanying Index to
       Financial Statements on page F-1 of this report.

    (2) FINANCIAL STATEMENT SCHEDULES:

       The financial statement schedule II is presented.

    (3) EXHIBITS

       The exhibits filed with or incorporated by reference in this report are
       listed in the Exhibit Index beginning on page E-1 of this report.

(b) REPORTS ON FORM 8-K

       The following reports on Form 8-K were filed by the Registrant during the
       fourth quarter:

           None

                                       36
<PAGE>
                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

<TABLE>
<S>                                                    <C>  <C>
                                                       ATRIUM COMPANIES, INC. AND SUBSIDIARIES

                                                       By:               /s/ JEFF L. HULL
                                                            -----------------------------------------
                                                                           Jeff L. Hull
                                                               PRESIDENT, CHIEF FINANCIAL OFFICER,
                                                                      TREASURER AND DIRECTOR
</TABLE>

Date: April 15, 1999

    Pursuant to the requirements of the Securities Act of 1934, this report has
been signed below by the following person on behalf of the registrant and in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
                      SIGNATURE                                 CAPACITY                   DATE
                      ---------                                 --------                   ----
<C>                                                    <S>                          <C>
                                                       President, Chief Financial
                                                         Officer, Treasurer and
                  /s/ JEFF L. HULL                       Director (Principal
     -------------------------------------------         Executive Officer and        March 30, 2000
                    Jeff L. Hull                         Principal Financial
                                                         Officer)

                                                       Vice President, Corporate
                          *                              Controller and Secretary
     -------------------------------------------         (Principal Accounting        March 30, 2000
                    Eric W. Long                         Officer)

                          *
     -------------------------------------------       Director                       March 30, 2000
                     R.L. Gilmer

                          *
     -------------------------------------------       Director                       March 30, 2000
                   Daniel T Morley

                          *
     -------------------------------------------       Director                       March 30, 2000
                   Roger A. Knight

                          *
     -------------------------------------------       Director                       March 30, 2000
                  Sam A. Wing, Jr.

                          *
     -------------------------------------------       Director                       March 30, 2000
                   James G. Turner
</TABLE>

                                       37
<PAGE>

<TABLE>
<CAPTION>
                      SIGNATURE                                 CAPACITY                   DATE
                      ---------                                 --------                   ----
<C>                                                    <S>                          <C>

                          *
     -------------------------------------------       Director                       March 30, 2000
                    Nimrod Natan

                          *
     -------------------------------------------       Director                       March 30, 2000
                   John Deterding

                          *
     -------------------------------------------       Director                       March 30, 2000
                 Andreas Hildebrand
</TABLE>

    Jeff L. Hull, by signing his name hereto, signs and executes this document
on behalf of each of the above-named officers and directors of Atrium
Companies, Inc. on the 30th day of March 2000, pursuant to powers of attorney
executed on behalf of each of such officers and directors, and contemporaneously
filed hereunto with the Securities and Exchange Commission.

<TABLE>
<S>   <C>                                                    <C>                          <C>
*By:                    /s/ JEFF L. HULL
             --------------------------------------
                          Jeff L. Hull
                        ATTORNEY-IN-FACT
</TABLE>

Date: March 30, 2000

                                       38
<PAGE>
                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                PAGE
                                                              --------
<S>                                                           <C>
ATRIUM COMPANIES, INC.
Report of Independent Accountants...........................     F-2
  Consolidated Financial Statements:
  Consolidated Balance Sheets as of December 31, 1999 and
    1998....................................................     F-3
  Consolidated Statements of Operations for the year ended
    December 31, 1999, 1998 and 1997........................     F-4
  Consolidated Statements of Stockholders' Equity for the
    year ended December 31, 1999, 1998 and 1997.............     F-5
  Consolidated Statements of Cash Flows for the year ended
    December 31, 1999, 1998 and 1997........................     F-6
Notes to Consolidated Financial Statements..................     F-7
Schedule II  Valuation and Qualifying Accounts..............     S-1
</TABLE>

                                      F-1
<PAGE>
                       REPORT OF INDEPENDENT ACCOUNTANTS

March 30, 2000
To the Board of Directors and Stockholder of
Atrium Companies, Inc.:

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 36 and listed in the index appearing under
Item 14(a)(2) on page 36, respectively, present fairly, in all material
respects, the financial position of Atrium Companies, Inc. and its subsidiaries
at December 31, 1999 and 1998, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
These financial statements and financial statement schedule are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

PricewaterhouseCoopers LLP
Dallas, Texas

                                      F-2
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
CURRENT ASSETS:
  Cash and cash equivalents.................................  $  1,294   $     --
  Restricted cash...........................................       869         --
  Equity securities--available for sale.....................       111        137
  Accounts receivable, net of allowance of $1,670 and $778,
    respectively............................................    59,213     46,466
  Inventories...............................................    61,277     46,289
  Prepaid expenses and other current assets.................    12,441      7,756
  Deferred tax asset........................................     2,359      1,249
                                                              --------   --------
  Total current assets......................................   137,564    101,897
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
  depreciation of $10,584 and $3,247, respectively..........    35,165     26,760
GOODWILL, net of accumulated amortization of $8,971 and
  $2,354, respectively......................................   287,873    214,749
DEFERRED FINANCING COSTS, net of accumulated amortization of
  $2,281 and $379, respectively.............................    17,607     11,058
OTHER ASSETS................................................     5,927      5,405
                                                              --------   --------
  Total assets..............................................  $484,136   $359,869
                                                              ========   ========

                      LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES:
  Current portion of notes payable..........................     2,297      2,209
  Accounts payable..........................................    26,737     25,353
  Accrued liabilities.......................................    25,055     15,432
                                                              --------   --------
  Total current liabilities.................................    54,089     42,994
                                                              --------   --------
LONG-TERM LIABILITIES:
  Notes payable.............................................   314,414    177,018
  Deferred tax liability....................................     2,557          1
  Other long-term liabilities...............................     3,056      6,800
                                                              --------   --------
  Total long-term liabilities...............................   320,027    183,819
                                                              --------   --------
  Total liabilities.........................................   374,116    226,813
                                                              --------   --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
  Common stock $.01 par value, 3,000 shares authorized, 100
    shares issued and outstanding...........................        --         --
  Paid-in capital...........................................   109,624    134,852
  Retained earnings (accumulated deficit)...................       398     (1,820)
  Accumulated other comprehensive income (loss).............        (2)        24
                                                              --------   --------
  Total stockholder's equity................................   110,020    133,056
                                                              --------   --------
    Total liabilities and stockholder's equity..............  $484,136   $359,869
                                                              ========   ========
</TABLE>

               The accompanying notes are an integral part of the
                       consolidated financial statements.

                                      F-3
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                           YEAR ENDED      YEAR ENDED      YEAR ENDED
                                                          DECEMBER 31,    DECEMBER 31,    DECEMBER 31,
                                                              1999            1998            1997
                                                          -------------   -------------   -------------
<S>                                                       <C>             <C>             <C>
NET SALES...............................................    $498,456        $211,059         $99,059
COST OF GOODS SOLD......................................     340,909         159,140          78,270
                                                            --------        --------         -------
  Gross profit..........................................     157,547          51,919          20,789
                                                            --------        --------         -------
OPERATING EXPENSES:
  Selling, delivery, general and administrative
  expenses..............................................     107,780          39,754          15,671
  Amortization expense..................................       8,717           2,133             774
  Non cash stock option compensation expense............         128           3,851              --
  Special charges.......................................       1,886              --              --
                                                            --------        --------         -------
                                                             118,511          45,738          16,445
                                                            --------        --------         -------
    Income from operations..............................      39,036           6,181           4,344
INTEREST EXPENSE........................................      28,524           9,081           2,953
OTHER INCOME, net.......................................         283             571              --
                                                            --------        --------         -------
  Income (loss) before income taxes and extraordinary
  charge................................................      10,795          (2,329)          1,391
PROVISION (BENEFIT) FOR INCOME TAXES....................       6,641            (149)            695
                                                            --------        --------         -------
  Income (loss) before extraordinary charge.............       4,154          (2,180)            696
EXTRAORDINARY CHARGE ON EARLY RETIREMENT OF DEBT (net of
  income tax benefit of $1,142 and $392 in 1999 and
  1998, respectively)...................................       1,936             639              --
                                                            --------        --------         -------
NET INCOME (LOSS).......................................    $  2,218        $ (2,819)        $   696
                                                            ========        ========         =======
</TABLE>

                 The accompanying notes are an integral part of
                     the consolidated financial statements.

                                      F-4
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
                                                                                                                      RETAINED
                                         COMMON STOCK              CLASS A               CLASS B                      EARNINGS
                                     ---------------------   -------------------   -------------------   PAID-IN    (ACCUMULATED
                                      SHARES      AMOUNT      SHARES     AMOUNT     SHARES     AMOUNT    CAPITAL      DEFICIT)
                                     --------   ----------   --------   --------   --------   --------   --------   -------------
<S>                                  <C>        <C>          <C>        <C>        <C>        <C>        <C>        <C>
Balance, December 31, 1996........      --      $     --        26        $ --        55        $  1     $  9,326      $   303
Net income........................      --            --        --          --        --          --           --          696
Issuance of warrants..............      --            --        --          --        --          --          349           --
                                       ---      ----------     ---        ----       ---        ----     --------      -------
Balance, December 31, 1997........      --            --        26          --        55           1        9,675          999
Conversion of Wing's common stock
  to Atrium's common stock........     100            --       (26)         --       (55)         (1)           1           --
Conversion of exchangeable
  subordinated note payable.......      --            --        --          --        --          --       11,375           --
Step-up of Wing's assets due to
  purchase of minority interest...      --            --        --          --        --          --        1,247           --
Contribution of assets of Darby...      --            --        --          --        --          --       13,147           --
Capital contribution from Atrium
  Corp............................      --            --        --          --        --          --       95,340           --
Non cash stock option compensation
  expense.........................      --            --        --          --        --          --        3,851           --
Exercise of stock options.........      --            --        --          --        --          --          216           --
Comprehensive loss:
  Net loss........................      --            --        --          --        --          --           --       (2,819)
  Unrealized gain on equity
    securities....................      --            --        --          --        --          --           --           --
                                       ---      ----------     ---        ----       ---        ----     --------      -------
Total comprehensive loss..........                                                                                      (2,819)
                                       ---      ----------     ---        ----       ---        ----     --------      -------
Balance, December 31, 1998........     100            --        --          --        --          --      134,852       (1,820)
Net income........................      --            --        --          --        --          --           --        2,218
Unrealized loss on equity
  securities......................      --            --        --          --        --          --           --           --
Non cash stock option compensation
  expense.........................      --            --        --          --        --          --          128           --
Capital contributions from Atrium
  Corp............................      --            --        --          --        --          --          635           --
Distribution to Atrium Corp.......      --            --        --          --        --          --      (25,991)          --
                                       ---      ----------     ---        ----       ---        ----     --------      -------
Balance, December 31, 1999........     100      $     --        --        $ --        --        $ --     $109,624      $   398
                                       ===      ==========     ===        ====       ===        ====     ========      =======

<CAPTION>

                                     ACCUMULATED OTHER         TOTAL
                                       COMPREHENSIVE       STOCKHOLDER'S
                                       INCOME (LOSS)          EQUITY
                                    --------------------   -------------
<S>                                 <C>                    <C>
Balance, December 31, 1996........          $--              $  9,630
Net income........................           --                   696
Issuance of warrants..............           --                   349
                                            ---              --------
Balance, December 31, 1997........           --                10,675
Conversion of Wing's common stock
  to Atrium's common stock........           --                    --
Conversion of exchangeable
  subordinated note payable.......           --                11,375
Step-up of Wing's assets due to
  purchase of minority interest...           --                 1,247
Contribution of assets of Darby...           --                13,147
Capital contribution from Atrium
  Corp............................           --                95,340
Non cash stock option compensation
  expense.........................           --                 3,851
Exercise of stock options.........           --                   216
Comprehensive loss:
  Net loss........................           --                (2,819)
  Unrealized gain on equity
    securities....................           24                    24
                                            ---              --------
Total comprehensive loss..........           24                (2,795)
                                            ---              --------
Balance, December 31, 1998........           24               133,056
Net income........................           --                 2,218
Unrealized loss on equity
  securities......................          (26)                  (26)
Non cash stock option compensation
  expense.........................           --                   128
Capital contributions from Atrium
  Corp............................           --                   635
Distribution to Atrium Corp.......           --               (25,991)
                                            ---              --------
Balance, December 31, 1999........          $(2)             $110,020
                                            ===              ========
</TABLE>

        The accompanying notes are an integral part of the consolidated
                             financial statements.

                                      F-5
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1999 1998 AND 1997
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                               YEAR ENDED      YEAR ENDED      YEAR ENDED
                                                              DECEMBER 31,    DECEMBER 31,    DECEMBER 31,
                                                                  1999            1998            1997
                                                              -------------   -------------   -------------
<S>                                                           <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss).........................................    $   2,218       $ (2,819)       $     696
  Adjustments to reconcile net income (loss) to net cash
    flows from operating activities:
  Extraordinary charge, net of income tax benefit...........          896            639               --
  Depreciation and amortization.............................       14,061          4,158            1,492
  Non cash stock option compensation expense................          128          3,851               --
  Amortization of deferred financing costs..................        1,902            732              390
  Accretion of discount on senior subordinated notes in 1999
    and exchangable subordinated notes payable in 1998 and
    1997....................................................           95            105              113
  Provision for bad debts...................................        1,123            227               60
  Gain on sales of assets...................................          (78)           (12)              --
  Deferred tax provision....................................        4,445            358              184
  Changes in assets and liabilities, net of acquisitions:
    Accounts receivable.....................................       (4,710)        (1,751)            (218)
    Inventories.............................................       (6,424)       (12,297)          (2,990)
    Prepaid expenses and other current assets...............       (3,420)        (2,142)            (166)
    Accounts payable........................................       (3,025)         2,630              354
    Accrued liabilities.....................................        1,624         (3,932)           1,233
                                                                ---------       --------        ---------
      Net cash provided by (used in) operating activities...        8,835        (10,253)           1,148
                                                                ---------       --------        ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment................      (16,996)        (2,221)          (1,355)
  Proceeds from sales of assets.............................        8,885             12               --
  Acquisition of Heat, Champagne and Delta Millwork, net of
    cash acquired and debt and accrued interest assumed.....      (95,327)            --               --
  Acquisition of Atrium, net of cash acquired and debt and
    accrued interest assumed................................           --       (120,977)              --
  Acquisition of the Door Division of Super Millwork........           --             --          (10,408)
  Other assets..............................................       (5,042)        (1,998)              --
                                                                ---------       --------        ---------
      Net cash used in investing activities.................     (108,480)      (125,184)         (11,763)
                                                                ---------       --------        ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of senior subordinated notes.......      172,368             --               --
  Proceeds from borrowings under term notes.................           --        145,930               --
  Payment of notes payable..................................      (15,000)       (29,563)          (1,032)
  Payment of senior subordinated notes previously
    outstanding.............................................      (29,070)       (70,930)             (70)
  Net borrowings under revolving credit facility............       11,152          4,118            1,497
  Proceeds from issuance of exchangeable subordinated
    notes...................................................           --             --            3,960
  Proceeds from issuance of notes payable...................           --             --            6,790
  Deferred financing costs..................................       (9,347)       (11,437)            (536)
  Scheduled principal payments on term notes................       (2,241)          (500)              --
  Contributions from (distributions to) Atrium Corp.........      (25,356)        95,340               --
  Exercise of stock options.................................           --            216               --
  Payment of other long-term liabilities....................       (2,003)            --               --
  Checks drawn in excess of bank balances...................          436          2,229               --
                                                                ---------       --------        ---------
      Net cash provided by financing activities.............      100,939        135,403           10,609
                                                                ---------       --------        ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........        1,294            (34)              (6)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..............           --             34               40
                                                                ---------       --------        ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD....................    $   1,294       $     --        $      34
                                                                =========       ========        =========
SUPPLEMENTAL DISCLOSURE:
  Cash paid during the period for:
    Interest................................................    $  23,227       $ 11,765        $   2,620
    Income taxes, net of refunds............................       (1,181)           536              550
  Cash received during the period held as:
    Restricted cash.........................................          869
  Noncash investing and financing activities:
    Conversion of exchangeable subordinated notes payable...           --         11,375               --
    Contribution of Darby's assets..........................           --         13,147               --
    Step-up of Wing's assets due to purchase of minority
     interest...............................................           --          1,247               --
    Purchase of equipment under capital leases..............           --             20              840
    Payable to seller.......................................           --             --            2,500
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                   statements

                                      F-6
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

1. ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION:

    Atrium Companies, Inc. (the "Company") is engaged in the manufacture and
sale of doors, windows and various building materials throughout the United
States.

    Prior to October 2, 1998, Atrium Companies, Inc.'s, ("Atrium") (the previous
registrant), historical financial statements as previously filed with the
Securities and Exchange Commission included its operations and the operations of
its wholly-owned subsidiaries, Atrium Door and Window Company of the Northeast,
Atrium Door and Window Company of New England, Atrium Door and Window Company of
New York (collectively "ADW--Northeast"), Atrium Door and Window Company--West
Coast ("ADW--West Coast") and Atrium Door and Window Company of Arizona
("ADW--Arizona"). On October 2, 1998, pursuant to an acquisition and merger (the
"Recapitalization" or "reverse acquisition") as more fully described in Note 3,
the Company's indirect Parent (D and W Holdings, Inc.) contributed the assets of
Wing Industries Holdings, Inc. and its subsidiary Wing Industries, Inc.
(collectively "Wing") and Door Holdings, Inc. and its subsidiaries R.G. Darby
Company, Inc. and Total Trim, Inc. (collectively "Darby") to the Company.

    As Wing was determined to be the acquiror in the reverse acquisition, the
historical financial statements of "Atrium" (prior to October 3, 1998) were
replaced with the historical financial statements of Wing. As a result, the
statement of operations for 1998 only includes the operations of the Company and
Darby from October 3, 1998. The statement of operations for the year ended
December 31, 1997, only include the operations and accounts of Wing and its
predecessor. Wing was acquired by the current controlling shareholders on
October 25, 1996. Additionally, the operations of Delta Millwork, Inc. (renamed
R.G. Darby Company-South and Total Trim-South, collectively, "Darby-South") are
included since the date of acquisition, January 27, 1999 and the operations of
Heat, Inc. ("Heat") and Champagne Industries, Inc. ("Champagne") are included
since their date of acquisition, May 17, 1999. The December 31, 1999 balance
sheet includes the accounts of the Company, Wing, Darby, Darby-South, Heat,
Champagne and each of their respective subsidiaries, while the December 31, 1998
balance sheet includes the accounts of the Company, Wing, Darby and each of
their respective subsidiaries.

                                      F-7
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

1. ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION: (CONTINUED)
    The following unaudited pro forma information presents consolidated
operating results as though the Recapitalization and the acquisitions of
ADW-Arizona (which was acquired March 27, 1998), Darby-South, Heat and Champagne
(see Note 4) had occurred at the beginning of the periods presented:

<TABLE>
<CAPTION>
                                                                YEAR ENDED             YEAR ENDED
                                                            DECEMBER 31, 1999      DECEMBER 31, 1998
                                                           --------------------   --------------------
                                                            ACTUAL    PRO FORMA    ACTUAL    PRO FORMA
                                                           --------   ---------   --------   ---------
<S>                                                        <C>        <C>         <C>        <C>
NET SALES................................................  $498,456   $526,931    $211,059   $493,032
COST OF GOODS SOLD.......................................   340,909    358,998     159,140    338,810
                                                           --------   --------    --------   --------
  Gross Profit...........................................   157,547    167,933      51,919    154,222
OPERATING EXPENSES:
Selling, delivery, general and administrative expenses...   107,780    117,482      39,754    105,059
Amortization expense.....................................     8,717      9,518       2,133      9,518
Non-cash stock option compensation expense...............       128        128       3,851      7,925
Special charges..........................................     1,886      1,886          --         --
                                                           --------   --------    --------   --------
                                                            118,511    129,014      45,738    122,502
  Income from operations.................................    39,036     38,919       6,181     31,720
INTEREST EXPENSE.........................................    28,524     32,765       9,081     32,765
OTHER INCOME, net........................................       283        348         571        502
                                                           --------   --------    --------   --------
  Income before taxes....................................    10,795      6,502      (2,329)      (543)
PROVISION (BENEFIT) FOR INCOME TAXES.....................     6,641      5,170        (149)     2,296
                                                           --------   --------    --------   --------
Income (loss) from continuing operations.................  $  4,154   $  1,332    $ (2,180)  $ (2,839)
                                                           ========   ========    ========   ========
Other Information:
Depreciation expense.....................................  $  5,344   $  5,885    $  1,996   $  5,521
                                                           ========   ========    ========   ========
</TABLE>

    The above pro forma information excludes $7,351 of special charges for the
year ended December 31, 1998 related to the 1998 Recapitalization (see Note 3).

2. SIGNIFICANT ACCOUNTING POLICIES:

    BASIS OF CONSOLIDATION

    The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.

    INDUSTRY SEGMENT

    The Company operates in a single industry segment, the fabrication,
distribution and installation of doors and windows and related components for
the residential construction, manufactured housing and the remodeling and
renovation markets.

                                      F-8
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
    REVENUE RECOGNITION

    Revenue from the sale of doors and windows and related components is
recorded at the time of delivery to the customer. Allowances are established to
recognize the risk of sales returns from customers and estimates of warranty
costs.

    CASH AND CASH EQUIVALENTS

    The Company considers all highly-liquid investments with original maturities
of three months or less to be cash equivalents. At December 31, 1999 and 1998,
the Company had $4,447 and $4,012 of checks outstanding that were reclassified
into accounts payable.

    RESTRICTED CASH

    Restricted cash represents proceeds received from certain dispositions of
property, plant and equipment. In accordance with the provisions of the
Company's Credit Agreement (See Note 9), the Company is required to reinvest the
proceeds within 180 days or alternatively retire debt associated with the Term
Loans B and C. Until the proceeds are applied in accordance with the provisions
of the Credit Agreement, the funds are held as restricted cash.

    EQUITY SECURITIES--AVAILABLE FOR SALE

    Investments in equity securities--available for sale are carried at market
based on quoted market prices, with unrealized gains (losses) recorded in
stockholder's equity.

    CONCENTRATIONS OF CREDIT RISK

    Financial instruments, which potentially expose the Company to
concentrations of credit risk, consist primarily of trade accounts receivable.
The Company's customers are located in all 50 states and in 6 different
countries. The Company performs ongoing credit evaluations of its customers'
financial condition and generally requires no collateral. The Company
establishes an allowance for doubtful accounts based upon factors surrounding
the credit risk of specific customers, historical trends and other information.
The Company has sales to two significant customers as follows (presented as a
percentage of actual net sales):

<TABLE>
<CAPTION>
                                                              PERIODS ENDED
                                                      ------------------------------
CUSTOMER                                              12/31/99   12/31/98   12/31/97
--------                                              --------   --------   --------
<S>                                                   <C>        <C>        <C>
The Home Depot, Inc.................................     26%        42%        43%
Lowe's Companies, Inc...............................      8%        17%        22%
</TABLE>

    INVENTORIES

    Inventories are valued at the lower of cost (last-in, first-out or "LIFO")
or market. Work-in- process and finished goods inventories consist of materials,
labor and manufacturing overhead. Inventory costs include direct materials,
labor and manufacturing overhead. Management believes that the LIFO method
results in a better matching of current costs with current revenues. Under the
first-in, first-out method

                                      F-9
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(FIFO) of accounting, such inventories would have been approximately $37 and
$112 lower at December 31, 1999 and 1998, respectively.

    PROPERTY, PLANT AND EQUIPMENT

    Property, plant and equipment is stated at cost less accumulated
depreciation. The Company depreciates the assets principally on a straight-line
basis for financial reporting purposes over their estimated useful lives, as
follows:

<TABLE>
<CAPTION>
                                                               ESTIMATED
                                                              USEFUL LIFE
                                                              -----------
<S>                                                           <C>
Buildings and improvements..................................  5-40 years
Machinery and equipment.....................................  3-12 years
</TABLE>

    Gains or losses on disposition are based on the net proceeds and the
adjusted carrying amount of the assets sold or retired. Expenditures for
maintenance, minor renewals and repairs are expensed as incurred, while major
replacements and improvements are capitalized.

    GOODWILL

    Goodwill represents the excess of cost over fair market value of net assets
acquired. Goodwill is being amortized over 40 years on a straight-line basis.
Management continually reviews the carrying value of goodwill for recoverability
based on anticipated undiscounted cash flows of the assets to which it relates.
The Company considers operating results, trends and prospects of the Company, as
well as competitive comparisons. The Company also takes into consideration
competition within the building materials industry and any other events or
circumstances which might indicate potential impairment. When goodwill is
determined not to be recoverable, an impairment is recognized as a charge to
operations.

    The Company believes that a 40 year useful life for goodwill is appropriate
based upon the fact that the majority of the Company's operating entities have
been in business over fifty years with some of the industry's most recognized
brand names including Atrium and Wing. Management believes its brand names have
an indeterminable life that may equal or exceed 40 years and therefore, will
amortize goodwill over that period. Further, products are not significantly
impacted by technological risks that would cause the Company to consider
reducing the goodwill life. The Company's management periodically reviews the
appropriateness of the estimated useful life of goodwill.

    CAPITALIZED SOFTWARE COSTS

    The Company capitalizes internal employee costs and external consulting
costs associated with implementing and developing software for internal use.
Internal costs capitalized include payroll and payroll-related costs for
employees who are directly associated with the development, modification and
implementation of the software. External costs include direct expenses related
to consulting and other professional fees consumed in developing, modifying and
implementing the software. Capitalization of costs occurs upon the completion of
the preliminary project stage and when management believes it is probable a
project will be completed and the software will be used to perform the function
intended. Amortization begins when the software is put into place and is
calculated on a straight-line basis over three

                                      F-10
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
years. Management continually reviews the carrying value and expected
functionality of the accumulated costs for potential impairment. When it is no
longer probable that computer software being developed will be completed,
modified or placed in service, the assets carrying value will be adjusted to the
lower of cost or fair value.

    Unamortized capitalized software costs at December 31, 1999 and 1998 were
$3,333 and $3,663, respectively, and are included in other long-term assets.
Amortization expense for 1999, 1998 and 1997 was $2,005, $304 and $0,
respectively.

    INCOME TAXES

    The provision for income taxes is based on pretax income as reported for
financial statement purposes. Deferred income taxes are provided in accordance
with the liability method of accounting for income taxes to recognize the tax
effects of temporary differences between financial statement and income tax
accounting.

    As discussed in Note 3, the Company's Statement of Operations for the year
ended December 31, 1997 only includes the operations and accounts of Wing and
its predecessor. Wing and its predecessor filed a consolidated tax return for
this period. For the year ended December 31, 1999 and 1998 the Company is
included in the D and W Holdings ("Parent") consolidated tax return. The
Company's income taxes for the year ended December 31, 1999 and 1998 have been
presented as if calculated on a stand-alone separate tax return basis. As of
December 31, 1999 and 1998, included in prepaid expenses and other current
assets are income tax receivables due from Parent of $3,006 and $5,019,
respectively.

    FORWARD COMMITMENTS

    The Company periodically enters into forward commitments to hedge price
variances in materials. Changes in the market value of forward commitments are
recognized in income when the effects of the related charges in the hedged items
are recognized.

    NEW ACCOUNTING PRONOUNCEMENTS

    In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" amended by SFAS
No. 137 "Accounting for Derivative Instruments and Hedging Activities--Deferral
of the Effective Date of FAS No. 133--Amendment of FAS No. 133" (combined
"SFAS 133"). SFAS 133 establishes accounting and reporting standards requiring
that every derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as either an asset
or liability measured at its fair value. SFAS 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company must formally
document, designate and assess the effectiveness of transactions that receive
hedge accounting.

    SFAS 133 is effective for fiscal years beginning after June 15, 2000. A
company may also implement the Statement as of the beginning of any fiscal
quarter after issuance (that is, fiscal quarters beginning June 16, 1999 and
thereafter). SFAS 133 cannot be applied retroactively. SFAS 133 must be applied
to (a) derivative instruments and (b) certain derivative instruments embedded in
hybrid contracts that were

                                      F-11
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
issued, acquired, or substantively modified after December 31, 1997 (and, at the
Company's election, before January 1, 1998).

    The Company is in the process of quantifying the impact of adopting
SFAS 133 on its financial statements and has not determined the timing of or
method of adoption of SFAS 133.

    USE OF ESTIMATES

    The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from these estimates. Significant
estimates are used in calculating bad debt, workers' compensation and warranty
accruals, and in recognizing deferred tax assets and liabilities.

    ADVERTISING COSTS

    Advertising costs are expensed when incurred and were $4,457, $2,841 and
$1,800, for 1999, 1998 and 1997, respectively. These costs are reflected in
"selling, delivery, general and administrative" in the consolidated statements
of operations.

    RECLASSIFICATIONS

    Certain reclassifications have been made to the 1998 and 1997 balances to
conform to the 1999 presentation.

3. THE REVERSE ACQUISITION (RECAPITALIZATION):

    On August 3, 1998, D and W Holdings, Inc. ("Parent or D and W"), entered
into an Agreement and Plan of Merger (the "Merger Agreement") with Atrium
Corporation ("Corp"), the parent of the Company and other necessary parties to
acquire all of the outstanding capital stock of Corp for $225.0 million, through
a series of transactions (the "Recapitalization") described below. Corp owned
100% of the outstanding capital stock of Atrium prior to the Merger discussed
below. GE Investment Private Placement Partners II, a limited partnership
("GEIPPPII"), and Ardatrium L.L.C. ("Ardatrium") formed Parent by acquiring all
of its outstanding common stock for an aggregate purchase price of $50.0
million. GEIPPPII is a private equity partnership affiliated with GE
Investments, a wholly-owned investment management subsidiary of General Electric
Company. Ardatrium is an affiliate of Ardshiel, Inc. ("Ardshiel"), a private
equity investment firm based in New York.

    The acquisition of Corp by Parent was effected through the merger on
October 2, 1998 of a wholly owned subsidiary of Parent, with and into Corp (the
"Merger") pursuant to the terms of the Merger Agreement. Prior to the Merger,
Parent contributed $50.0 million to a wholly-owned subsidiary in exchange for
all of its outstanding common stock. As a result of the Merger, Corp became a
direct wholly-owned subsidiary of Parent, and the Company became an indirect
wholly owned subsidiary of Parent.

    Pursuant to the terms of the Merger Agreement, all of the outstanding equity
securities of Corp were converted into the right to receive the merger
consideration of $94.2 million (the "Merger Consideration")

                                      F-12
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

3. THE REVERSE ACQUISITION (RECAPITALIZATION): (CONTINUED)
in cash, net of transaction costs of $5.4 million, outstanding indebtedness of
$122.7 million and $2.7 million of equity securities of Corp, owned by certain
members of management of the Company, which were converted into comparable
equity securities of Parent. The Merger Consideration was funded with (i) the
$50.0 million in cash that became an asset of Corp in the Merger,
(ii) $20.0 million in cash proceeds from the issuance of Senior Discount
Debentures due 2010 by Corp. to GEIPPPII and Ardatrium (the "Discount
Debentures"), (iii) approximately $24.0 million in cash proceeds from a loan
from the Company (the "Intercompany Loan") which was funded by a portion of the
proceeds of a term loan to the Company under the Credit Facility (see Note 9),
and (iv) $0.2 million in cash proceeds from the issuance of common stock of
Parent to certain members of management of the Company followed by a capital
contribution of such proceeds by Parent to Corp.

    Prior to the Merger, both GEIPPPII and Ardshiel held investments in Wing and
Darby in the form of common stock, subordinated debt and/or warrants as follows:

                                              (AMOUNTS IN EQUIVALENT COMMON
                                              SHARES)

            WING

<TABLE>
<CAPTION>
SECURITY TYPE                               GEIPPPII   ARDSHIEL    OTHER      TOTAL
-------------                               --------   --------   --------   --------
<S>                                         <C>        <C>        <C>        <C>
Common A..................................   12,500      6,153     6,848      25,501
Common B..................................   54,500          -         -      54,500
Subordinated Debt.........................   68,657          -         -      68,657
Warrants..................................   23,378      5,714         -      29,092
                                            -------     ------     -----     -------
                                            159,035     11,867     6,848     177,750
                                            =======     ======     =====     =======

    DARBY
</TABLE>

<TABLE>
<CAPTION>
SECURITY TYPE                               GEIPPPII   ARDSHIEL    OTHER      TOTAL
-------------                               --------   --------   --------   --------
<S>                                         <C>        <C>        <C>        <C>
Common....................................   49,005       495      7,500      57,000
Subordinated Debt.........................   41,807       422          -      42,229
Warrants..................................   11,595       117          -      11,712
                                            -------     -----      -----     -------
                                            102,407     1,034      7,500     110,941
                                            =======     =====      =====     =======
</TABLE>

    Immediately prior to the consummation of the Merger, all of the outstanding
subordinated debt and associated warrants to purchase common stock of Wing and
Darby were converted into common stock of Wing and Darby, respectively. The
stockholders of Wing and Darby contributed their common stock in Wing and Darby
to Parent in exchange for common stock in Parent. Immediately after the
consummation of the Merger, Parent contributed all of the common stock of Wing
and Darby to Corp, which in turn contributed such stock to the Company.

                                      F-13
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

3. THE REVERSE ACQUISITION (RECAPITALIZATION): (CONTINUED)
    This transaction resulted in an increase in GEIPPPII's ownership interest in
Wing and Darby as follows:

<TABLE>
<CAPTION>
                           WING                             PERCENTAGE OWNERSHIP
                           ----                             --------------------
<S>                                                         <C>
Immediately prior to the consummation
  Equity basis in common stock............................          83.75%
  Equity basis on a fully converted basis.................          89.47%
Subsequent to merger......................................          94.83%
</TABLE>

<TABLE>
<CAPTION>
                          DARBY
<S>                                                         <C>
Immediately prior to the consummation
  Equity basis in common stock............................       85.97%
  Equity basis on a fully converted basis.................       92.31%
Subsequent to merger......................................       94.83%
</TABLE>

    GEIPPPII's cost basis in Wing and Atrium was pushed-down to the Company.
This resulted in a partial "step-up" of Wing and Darby's assets and a
corresponding purchase of minority interest from Atrium's previous owners. The
increase in GEIPPPII's financial interest in Wing and Atrium was accounted for
in accordance with EITF 90-13, ACCOUNTING FOR SIMULTANEOUS COMMON CONTROL
MERGERS.

    The minority interests acquired by GEIPPPII in Wing and Darby were 5.36% and
2.52%, respectively. The amount paid for the minority interest in Wing and Darby
was $1,849 and $433, respectively. The purchase method of accounting was also
applied to the net assets of Wing and Darby to the extent minority interest was
acquired. Goodwill was increased by $1,247 and $243 for Wing and Darby,
respectively.

    Further, GEIPPPII and Ardatrium invested cash in the Company that is
reflected as a capital contribution from Atrium Corporation. The amounts
invested by each party are reflected below:

<TABLE>
<CAPTION>
                                                              CASH INVESTED
                                                              -------------
<S>                                                           <C>
GEIPPPII....................................................     $49,500
Ardatrium...................................................         500
Management..................................................         340
Discount Debentures issued by Atrium Corporation............      45,000
                                                                 -------
  Capital Contribution from Atrium Corporation to Atrium
    Companies, Inc..........................................     $95,340
                                                                 =======
</TABLE>

    Upon completion of the Recapitalization, GEIPPPII and Ardatrium and its
affiliates beneficially owned approximately 96.7% of the outstanding common
stock of Parent with management owning the remaining 3.3%.

    The acquisition of Corp by Parent and the Merger was accounted for as a
reverse acquisition. As Wing's shareholder group received the largest ownership
interest in Parent, Wing was determined to be the

                                      F-14
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

3. THE REVERSE ACQUISITION (RECAPITALIZATION): (CONTINUED)
"accounting acquiror" in the reverse acquisition. As a result, purchase
accounting was applied to the assets and liabilities of Atrium. The purchase
price was allocated to Atrium's assets and liabilities as follows:

<TABLE>
<S>                                                           <C>
Equity securities available for sale........................  $    113
Accounts receivable.........................................    32,097
Inventories.................................................    18,766
Prepaid expenses and other current assets...................     4,506
Deferred tax asset..........................................     2,268
Property, plant and equipment...............................    18,391
Other noncurrent assets.....................................     3,326
Goodwill....................................................   170,447
Current liabilities.........................................   (24,614)
Other long-term liabilities.................................      (300)
                                                              --------
Total purchase price........................................  $225,000
                                                              ========
</TABLE>

    The purchase price included cash paid of $120,977, net of the retirement of
certain indebtedness, and the assumption of debt and accrued interest of
$104,023.

    In 1999, the Company recorded purchase price adjustments of $3,262, within
goodwill related to the resolution of certain acquisition contingencies relating
primarily to additional transaction costs, the fair value of certain fixed
assets and additional liabilities.

    In connection with the acquisition of Atrium, certain integration activities
were undertaken in the acquired business. These activities included the
elimination of certain product lines and the associated inventory, severance
paid to employees terminated through the elimination of redundant positions,
costs associated with plant closings and rent expenses related to idle
facilities. In connection with these integration activities the Company recorded
accrued provisions using the purchase method of accounting. The activity
impacted by these provisions is summarized as follows:

<TABLE>
<CAPTION>
                                                            RESERVE
                                        BALANCE AT         ADDITIONS     EXPENDITURES       BALANCE AT
                                    DECEMBER 31, 1998       IN 1999        IN 1999      DECEMBER 31, 1999
                                    ------------------   -------------   ------------   ------------------
<S>                                 <C>                  <C>             <C>            <C>
Product line rationalizations.....          750                912          (1,464)              198
Severance expenses................           --                400            (400)               --
Idle facility expenses............           --              1,176            (428)              748
Other.............................           --                334            (334)               --
                                            ---              -----          ------             -----
                                            750              2,822          (2,626)              946
                                            ===              =====          ======             =====
</TABLE>

4. ACQUISITIONS:

DELTA ASSET PURCHASE:

    On January 27, 1999, the Company acquired certain assets of Delta
Millwork, Inc. (renamed R.G. Darby Company-South and Total Trim, Inc.-South,
collectively Darby-South), a privately held door

                                      F-15
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

4. ACQUISITIONS: (CONTINUED)
pre-hanger located in Orlando, Florida, for approximately $1,755 including fees
and transaction expenses of $155 and $200 to be paid upon the achievement of
certain financial targets. The Company financed the acquisition through its
revolving credit facility.

    The acquisition of Delta Millwork, Inc. has been accounted for as a purchase
in accordance with Accounting Principles Board Opinion No. 16, "Business
Combinations" ("APB 16"). The aggregate purchase price has been allocated to the
underlying assets and liabilities based upon their respective estimated fair
market values at the date of acquisition, with the remainder allocated to
goodwill, which will be amortized over 40 years. The results of operations for
the acquired business are included in the Company's consolidated financial
statements beginning January 27, 1999. The purchase price allocation,
preliminary in nature and subject to change, is as follows:

<TABLE>
<S>                                                           <C>
Accounts receivable, net....................................  $1,178
Inventories.................................................     620
Prepaid expenses and other current assets...................      40
Property, plant and equipment, net..........................     137
Other noncurrent assets.....................................       5
Goodwill....................................................     492
Accounts payable............................................    (633)
Accrued liabilities.........................................     (84)
                                                              ------
    Total purchase price....................................  $1,755
                                                              ======
</TABLE>

HEAT STOCK PURCHASE

    On May 17, 1999, the Company acquired the stock of Heat, Inc. ("Heat"), a
privately held vinyl window and door company with operations located in Yakima,
Washington (Best Built, Inc.) and Pittsburgh, Pennsylvania (Thermal Industries,
Inc.), pursuant to a stock purchase agreement (the "Purchase Agreement"), dated
as of April 20, 1999, among Heat, its shareholders and optionholders, H.I.G.
Vinyl, Inc., a Cayman Island corporation, H.I.G. Investment Fund, L.P., a Cayman
Island limited partnership and H.I.G. Capital Management, Inc., a Delaware
corporation. The Company paid $85,000, which included $679 of assumed
indebtedness. Additionally, a post closing adjustment of $4,095 was paid on
May 17, 1999 related to working capital and cash delivered in excess of the
target defined in the Purchase Agreement. The Company financed the acquisition
with a portion of the proceeds raised in the $175,000 Senior Subordinated Notes
due 2009 offering.

    The acquisition of Heat has been accounted for as a purchase in accordance
with APB 16. The aggregate purchase price has been allocated to the underlying
assets and liabilities based upon their respective estimated fair market values
at the date of acquisition, with the remainder allocated to goodwill, which will
be amortized over 40 years. The results of operations for the acquired business
are included in

                                      F-16
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

4. ACQUISITIONS: (CONTINUED)
the Company's consolidated financial statements beginning May 17, 1999. The
purchase price allocation, preliminary in nature and subject to change, is as
follows:

<TABLE>
<S>                                                           <C>
Cash........................................................  $ 1,158
Accounts receivable, net....................................    6,540
Inventories.................................................    7,104
Prepaid expenses and other current assets...................      983
Deferred tax assets.........................................      808
Property, plant and equipment, net..........................    7,546
Other noncurrent assets.....................................      791
Goodwill....................................................   74,183
Accounts payable............................................   (2,318)
Accrued liabilities.........................................   (4,425)
Current portion of notes payable............................      (66)
Deferred tax liability......................................     (334)
                                                              -------
    Total purchase price....................................  $91,970
                                                              =======
</TABLE>

CHAMPAGNE STOCK PURCHASE:

    On May 17, 1999, the Company acquired stock of Champagne Industries, Inc., a
privately held vinyl window and door company located in Denver, Colorado, for
approximately $4,426, including assumed indebtedness, transaction fees and $500
to be paid upon the achievement of certain financial targets. The Company
financed the acquisition with a portion of the proceeds raised in the $175,000
Senior Subordinated Notes due 2009 offering.

    The acquisition of Champagne Industries, Inc. has been accounted for as a
purchase in accordance with APB 16. The aggregate purchase price has been
allocated to the underlying assets and liabilities based upon their respective
estimated fair market values at the date of acquisition, with the remainder
allocated to goodwill, which will be amortized over 40 years. The results of
operations for the acquired business are

                                      F-17
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

4. ACQUISITIONS: (CONTINUED)
included in the Company's consolidated financial statements beginning May 17,
1999. The purchase price allocation, preliminary in nature and subject to
change, is as follows:

<TABLE>
<S>                                                           <C>
Cash........................................................  $  251
Accounts receivable, net....................................   1,441
Inventories.................................................   1,037
Prepaid expenses and other current assets...................     142
Deferred tax asset..........................................      58
Property, plant and equipment, net..........................     344
Other noncurrent assets.....................................      27
Goodwill....................................................   2,617
Accounts payable............................................  (1,025)
Accrued liabilities.........................................    (438)
Current portion of notes payable............................      (9)
Long term portion of notes payable..........................     (19)
                                                              ------
    Total purchase price....................................  $4,426
                                                              ======
</TABLE>

5. FAIR VALUE OF FINANCIAL INSTRUMENTS:

    In accordance with Statement of Financial Accounting Standards No. 107
("FAS 107") "Disclosures About Fair Value of Financial Instruments," the
following methods have been used in estimating fair value disclosures for
significant financial instruments of the Company.

    Estimated fair value amounts have been determined by the Company using
available market information and appropriate valuation methodologies. Due to the
fact that considerable judgment is required to interpret market data to develop
the estimates of fair value, the estimates presented are not necessarily
indicative of the amounts that could be realized in a current market exchange.

    Cash and cash equivalents--The carrying amounts reported in the balance
    sheet approximate the fair value.

    Equity securities--available for sale--The carrying amounts that are
    reported in the balance sheet approximate the fair value based on quoted
    market prices.

    Notes payable--The fair value of the Company's notes is based on quoted
    market prices. The carrying value of notes payable, other than the Senior
    Subordinated Notes, approximate fair value due to the floating nature of the
    interest rates. Management estimates that the Senior Subordinated Notes of
    $175,000 are valued at $170,406 as of December 31, 1999 based on quoted
    market prices.

    Interest Rate Swaps--The Company has entered into two interest rate swap
    agreements whereby the Company will pay the counterparties interest at a
    fixed rate and the counterparties will pay the Company interest at a
    floating rate equal to the three-month LIBOR interest rate. The fair value
    of

                                      F-18
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

5. FAIR VALUE OF FINANCIAL INSTRUMENTS: (CONTINUED)
    interest rate swap agreements is the amount at which they could be settled,
    based on estimates obtained from lenders. Swaps consisted of the following
    at December 31:

<TABLE>
<CAPTION>
                                                         1999        1998
                                                       ---------   ---------
<S>                                                    <C>         <C>
Swap #1
  Notional Amount....................................  $    563    $  1,406
  Fixed Interest Rate................................      6.50%       6.50%
  Termination Date...................................   3/31/00     3/31/00
  Unrealized Gain/(Loss).............................  $     --    $    (15)

Swap #2
  Notional Amount....................................  $  2,498    $  2,827
  Fixed Interest Rate................................      6.25%       6.25%
  Termination Date...................................   11/6/03     11/6/03
  Unrealized Gain/(Loss).............................  $     26    $    (87)
</TABLE>

    Forward aluminum contracts--The unrealized gains and losses are based on
    quotes for aluminum as reported on the London Metal Exchange. As of
    December 31, 1999, the Company had forward contracts with fixed rate prices
    totaling $10,321 with an unrealized gain of $960.

6. INVENTORIES:

    Inventories consisted of the following at December 31:

<TABLE>
<CAPTION>
                                                              1999       1998
                                                            --------   --------
<S>                                                         <C>        <C>
Raw materials.............................................  $32,481    $27,362
Work-in-process...........................................    4,688      4,129
Finished goods............................................   24,071     14,686
                                                            -------    -------
                                                             61,240     46,177
LIFO reserve..............................................       37        112
                                                            -------    -------
                                                            $61,277    $46,289
                                                            =======    =======
</TABLE>

    The change in the LIFO reserve for 1999, 1998 and 1997, resulted in a
decrease in cost of sales of $75 and $209 and an increase in cost of sales of
$95, respectively.

                                      F-19
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

7. PROPERTY, PLANT AND EQUIPMENT:

    Property, plant and equipment consisted of the following at December 31:

<TABLE>
<CAPTION>
                                                             1999       1998
                                                           --------   --------
<S>                                                        <C>        <C>
Land.....................................................  $    956   $ 1,303
Buildings and improvements...............................     8,597     8,671
Machinery and equipment..................................    35,211    19,311
Construction-in-process..................................       985       722
                                                           --------   -------
  Total..................................................    45,749    30,007
Less accumulated depreciation and amortization...........   (10,584)   (3,247)
                                                           --------   -------
                                                           $ 35,165   $26,760
                                                           ========   =======
</TABLE>

    Depreciation expense was $5,346, $1,996 and $1,180 for the years ended
December 31, 1999, 1998 and 1997, respectively.

    On November 18, 1999, the Company sold two of its manufacturing facilities
and subsequently leased back the facilities. In connection with the sales, the
Company recognized a net gain of $143. This gain has been deferred and will be
amortized and netted against rent expense over the term of the leases.

8. DEFERRED FINANCING COSTS:

    The deferred financing costs relate to costs incurred in the placement of
the Company's debt and are being amortized using the effective interest method
over the terms of the related debt, which range from five to ten years.
Amortization expense for the years ended December 31, 1999, 1998 and 1997 was
$1,902, $732 and $390, respectively and was recorded as interest expense in the
accompanying consolidated statements of operations.

    During 1999 the Company wrote off deferred financing costs of $896 and paid
a tender premium of $2,182, net of income tax benefit of $1,142 in connection
with the paydown of the Term Loan B and the retirement of the old Senior
Subordinated Notes due 2006. During 1998 the Company wrote off deferred
financing costs of $639, net of income tax benefit of $392, in connection with
the Recapitalization.

                                      F-20
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

9. NOTES PAYABLE:

    Notes payable consisted of the following at December 31:

<TABLE>
<CAPTION>
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
$175,000 Senior Subordinated Notes, issued with a discount
  of $2,632, due May 17, 2009, with semiannual interest
  payments of 10 1/2% due May 1 and November 1..............  $175,000   $     --
$100,000 Senior Subordinated Notes, due November 15, 2006,
  with semiannual interest payments of 10 1/2%, repaid May
  1999......................................................        --     29,070

Revolving credit facility...................................    15,270      4,118

$75,000 Term Loan B, due June 30, 2005 with $250 quarterly
  payments, interest at either the administrative agent's
  base rate plus an applicable margin or LIBOR plus an
  applicable margin (9.00% at December 31, 1999)............    58,750     74,750

$70,930 Term Loan C, due June 30, 2006, with $250 quarterly
  payments, interest at either the administrative agent's
  base rate plus an applicable margin or LIBOR plus an
  applicable margin (9.25% at December 31, 1999)............    69,680     70,680

Other notes payable.........................................       548        609
                                                              --------   --------

                                                               319,248    179,227

Less:

  Unamortized discount on Senior Subordinated Notes.........    (2,537)        --

  Current maturities of long-term debt......................    (2,297)    (2,209)
                                                              --------   --------

    Long-term debt..........................................  $314,414   $177,018
                                                              ========   ========
</TABLE>

    On May 17, 1999, the Company issued $175,000 of Senior Subordinated Notes
(the "Notes") due May 1, 2009. The notes are non-callable for five years, have a
10.50% stated rate paid semi-annually and were issued at a discount of 98.496 to
yield 10.75% to maturity. In connection with the issuance of the Notes, the
Company retired its $29,070 of senior subordinated notes due November 15, 2006
and paid down $15,000 on its Term Loan B. Additionally, approximately $2,182 was
paid as a tender premium to retire the notes due November 15, 2006 and $896 of
deferred financing fees related to these paydowns were written-off. These
amounts are recorded as extraordinary items in the statement of operations.

    The Company entered into a Credit Agreement (the "Credit Agreement"), dated
as of October 2, 1998 with Bank Boston, as administrative agent (the
"Administrative Agent") and Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, as lead arranger, syndication agent and
documentation agent.

    The Credit Agreement provides for three separate facilities (the
"Facilities") consisting of two term loans (referred to individually as "Term
Loan B" and "Term Loan C", and collectively as the "Term Loans") and a revolving
credit facility with a letter of credit sub-facility (the "Revolving Facility",
together with the Term Loans, the "Loans"). The Revolving Facility is in the
amount of $40,000 (increased from $30,000 in June 1999), of which $5,000 is
available under a letter of credit sub-facility. As of December 31,

                                      F-21
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

9. NOTES PAYABLE: (CONTINUED)
1999 and 1998, letters of credit of $4,634 and $2,609, respectively, were
outstanding. The Revolving Facility has a maturity date of June 30, 2004.

    All amounts outstanding under the Credit Agreement are collateralized by
(i) a pledge of all of the capital stock and intercompany notes of the Company
and its direct and indirect subsidiaries existing October 2, 1998 or thereafter
and (ii) an interest in substantially all of the tangible and intangible
properties and assets (including substantially all contract rights, certain real
property interests, trademarks, tradenames, equipment and proceeds of the
foregoing) of Corp, the Company and their respective direct and indirect
domestic subsidiaries existing on the October 2, 1998 or thereafter created or
acquired (the "Domestic Subsidiaries"). Corp and each of the Domestic
Subsidiaries have unconditionally guaranteed, on a joint and several basis, all
obligations of the Company under the Credit Agreement.

    The Term Loans have an "excess cash flows" provision mandating additional
principal payments if certain cash flows targets are met during the year. No
additional principal payments are required as of December 31, 1999 or 1998
related to this provision.

    The Company is required to pay certain commitment fees in connection with
the Credit Agreement based upon the average daily unused portion of the
Revolving Facility, certain fees assessed in connection with the issuance of
letters of credit as well as other fees specified in the Credit Agreement and
other documents related thereto.

    The Credit Agreement requires the Company to comply with certain covenants
which, among other things, include limitations on indebtedness, liens and
further negative pledges, investments, contingent obligations, dividends,
redemptions and repurchases of equity interests, mergers, acquisitions and asset
sales, capital expenditures, sale leaseback transactions, transactions with
affiliates, dividend and other payment restrictions affecting subsidiaries,
changes in business conducted, amendment of documents relating to other
indebtedness and other material documents, creation of subsidiaries, designation
of Designated Senior Indebtedness in respect of the Notes, and prepayment or
repurchase of other indebtedness. The Credit Agreement requires the Company to
meet certain financial tests pertaining to, interest coverage, fixed charge
coverage and leverage. On March 24, 2000, effective December 31, 1999, the
Company amended its Credit Agreement with regards to certain financial
covenants. After giving effect to the amendment, the Company is in compliance
with all related covenants.

    The Credit Agreement contains customary events of default, including,
without limitation, payment defaults, covenant defaults, breaches of
representations and warranties, bankruptcy and insolvency, judgments, change of
control and cross-default with certain other indebtedness.

    On January 4, 1999, the Company entered into two interest rate collars
totaling $60,000. These collars expire on January 6, 2002. The collars have a
floor of 4.57% and 4.66%, respectively, and caps of 6.00%. To the extent that
the three month US dollar LIBOR rate is below the collar floor, payment is due
from the Company for the difference to the extent the three month US dollar
LIBOR rate is above the collar cap, the Company is entitled to receive the
difference. On August 6, 1999, the Company terminated the collars. The Company
received $790 in connection with the termination. This gain is deferred and
being amortized over 29 months, the remaining term of the collars, as a
reduction to interest expense.

                                      F-22
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

9. NOTES PAYABLE: (CONTINUED)
    Principal payments due during the next five years on long-term notes payable
as of December 31, 1999 are as follows:

<TABLE>
<S>                                                 <C>
2000..............................................  $  2,297
2001..............................................     2,237
2002..............................................     2,009
2003..............................................     2,004
2004..............................................    17,270
Thereafter........................................   293,431
                                                    --------
                                                    $319,248
                                                    ========
</TABLE>

10. ACCRUED LIABILITIES:

    Accrued expenses and other liabilities consisted of the following at
December 31:

<TABLE>
<CAPTION>
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Salaries, wages and related taxes...........................    7,171      4,826
Interest....................................................    4,451      1,175
Sales, use and property taxes...............................    2,089      1,185
Advertising allowances and customer rebates.................    2,065      2,364
Warranty reserve............................................    1,492        355
Workers' compensation.......................................    1,027      1,134
Other.......................................................    6,760      4,393
                                                               ------     ------
                                                               25,055     15,432
                                                               ======     ======
</TABLE>

11. DISTRIBUTIONS TO ATRIUM CORPORATION:

    In connection with the issuance of the $175,000 of Senior Subordinated
Notes, the Company utilized $21,500 of the proceeds to pay a distribution to
Atrium Corporation. Atrium Corporation, in turn, repaid $21,500 (of which $1,500
represented accretion of discount) of the $45,000 Discount Debentures issued in
connection with the Recapitalization. The Company had previously recorded the
$45,000 as a capital contribution, therefore the payment was treated as a return
of capital. Additionally, the Company made a payment to Atrium Corporation for
the buyback of stock and the cancellation of certain options by the former CEO
and another manager. All payments have been reflected in the Consolidated
Statement of Stockholder's Equity as a decrease to paid-in capital. The Company
has no commitments to make any further distributions to Atrium Corporation,
except for amounts required under its tax sharing agreement.

                                      F-23
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

12. FEDERAL INCOME TAX:

    Temporary differences that give rise to the deferred income tax assets and
liabilities are as follows as of December 31:

<TABLE>
<CAPTION>
                                                              1999       1998
                                                            --------   --------
<S>                                                         <C>        <C>
Deferred income tax assets:
  Stock option compensation...............................  $ 1,191    $ 2,486
  Transaction costs.......................................      623      1,341
  Allowance for doubtful accounts.........................      575        380
  Inventory cost capitalization and valuation.............    1,095        648
  Accrued vacation and bonus..............................      701        608
  Warranty reserve........................................      600        135
  Workers' compensation reserve...........................      467        431
  Deferred rent...........................................      324         --
  Alternative minimum tax credit carryforwards and other        876        130
                                                            -------    -------
                                                              6,452      6,159
Deferred income tax liabilities:
  Depreciation............................................   (1,955)    (1,861)
  LIFO reserve............................................   (1,498)    (1,505)
  Capitalized software costs..............................   (1,021)    (1,039)
  Amortization of goodwill................................   (2,176)      (506)
                                                            -------    -------
                                                             (6,650)    (4,911)
                                                            -------    -------
Net deferred income tax asset asset (liability)...........     (198)     1,248
Less-current deferred tax asset...........................    2,359      1,249
                                                            -------    -------
Long-term deferred tax liability..........................  $(2,557)   $    (1)
                                                            =======    =======
</TABLE>

    A valuation allowance is required against deferred tax assets if, based on
the weight of available evidence, it is more likely than not that some of or all
of the deferred tax assets will not be realized. As of December 31, 1999 and
1998, no valuation reserve was required.

    A deferred tax asset of $2,593 was recorded for Corp and Darby in connection
with the Recapitalization.

    The components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
                                                   YEAR ENDED      YEAR ENDED      YEAR ENDED
                                                  DECEMBER 31,    DECEMBER 31,    DECEMBER 31,
                                                      1999            1998            1997
                                                  -------------   -------------   -------------
<S>                                               <C>             <C>             <C>
Current federal income tax provision
  (benefit).....................................      1,714           $(467)          $462
Deferred federal income tax provision...........      3,953             330            184
State income tax provision (benefit)............        974             (12)            49
                                                     ------           -----           ----
Provision (benefit) for income taxes............      6,641           $(149)          $695
                                                     ======           =====           ====
</TABLE>

                                      F-24
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

12. FEDERAL INCOME TAX: (CONTINUED)
    Reconciliation of the federal statutory income tax rate to the effective tax
rate, was as follows:

<TABLE>
<CAPTION>
                                                   YEAR ENDED      YEAR ENDED      YEAR ENDED
                                                  DECEMBER 31,    DECEMBER 31,    DECEMBER 31,
                                                      1999            1998            1997
                                                  -------------   -------------   -------------
<S>                                               <C>             <C>             <C>
Tax computed at statutory rate..................      3,778           $(815)          $473
State taxes, net of federal benefit.............        974             (12)            67
Amortization of goodwill........................      1,786             495            110
Other...........................................        103             183             45
                                                     ------           -----           ----
Provision (benefit) for income taxes............      6,641           $(149)          $695
                                                     ======           =====           ====
</TABLE>

    For income tax purposes, Internal Revenue Code Section 197 ("IRC section
197") provides for the amortization of certain intangible assets, including
goodwill, for asset acquisitions occurring after August 1993. Any resulting
difference in the book and tax basis of these intangibles is reflected as a
component of deferred taxes. Amortization expense related to intangible assets
which do not qualify under IRC section 197 is reflected as nondeductible
amortization in the rate reconciliation.

    In connection with the Recapitalization, the Company recorded goodwill for
book that is non-deductible for tax purposes. The Company has also recorded as a
temporary difference goodwill attributable to other asset acquisitions whereby
the goodwill is deductible for tax.

    The Company has recorded a deferred tax liability relating to the difference
in the book and tax basis of the LIFO reserve. This book and tax basis
difference was created primarily by certain purchase accounting adjustments
relating to Atrium from the 1998 Recapitalization and from the October 1996
acquisition of Wing.

13. RELATED PARTIES:

    MANAGEMENT AND INVESTMENT BANKING AGREEMENT

    In November 1997, Wing amended its ten-year Management and Investment
Banking Agreement (the "Old Management Agreement") with Ardshiel. Pursuant
thereto, Wing agreed to pay Ardshiel an annual fee of $375 plus expenses for
ongoing management advisory services to Wing. In 1998 and 1997, $368, and $485,
respectively, was paid to Ardshiel under this agreement. The Old Management
Agreement was terminated in connection with the Recapitalization on October 2,
1998.

    FINANCIAL ADVISORY FEE

    Ardshiel received a financial advisory fee of $600 plus expenses on the
closing date of the October 26, 1996 transaction as compensation for its
services as financial advisor to Wing. In addition, Ardshiel received warrants
to obtain 5,714 shares of Class A voting common stock at no additional cost.
Such warrants can be converted into Class A voting common stock at any time. The
warrants were valued at $332 and were included in the total purchase price of
Wing.

    Ardshiel received an investment banking fee of $250 plus expenses on the
closing date of the acquisition of the Door Division of Super Millwork, Inc. as
compensation for its services to Wing in connection with this acquisition.

                                      F-25
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

13. RELATED PARTIES: (CONTINUED)
    SHAREHOLDER AGREEMENT

    GEIPPPII, Ardatrium and certain of its affiliates, and certain other
shareholders of Parent have entered into a Shareholder Agreement (the
"Shareholder Agreement"), dated as of October 2, 1998, which affect their
relative rights as shareholders of Parent.

    The terms of the Shareholder Agreement include provisions that restrict the
parties to certain actions. Specifically, GEIPPPII and Ardshiel may appoint an
agreed upon number of members of the Board of Directors . Further, the
Shareholders Agreement has restrictions on selling, transferring or disposing of
ownership interests in the Company and provisions regarding registration of the
Company's stock under the Securities Act of 1933. Finally, the Shareholder
Agreement indicates the major stockholders cannot take certain enumerated
actions without obtaining the prior written consent of GEIPPPII.

    MANAGEMENT AGREEMENT

    Parent is a party to a Management Agreement (the "Management Agreement")
dated October 2, 1998 with Ardshiel. Pursuant to the Management Agreement,
Ardshiel provides advice to Parent and its subsidiaries with respect to business
strategy, operations and budgeting and financial controls ("Management
Services") in exchange for an annual fee of $1,750, as amended, plus expenses.
In 1999, amounts paid under this agreement totaled $1,904, which is included in
selling, delivery, general and administrative expenses as incurred.
Additionally, the Management Agreement provides that, prior to entering into any
transaction that involves engaging a financial advisor to perform services in
connection with a sale or purchase of a business or entity or any financing
including, Parent or its subsidiaries must offer Ardshiel the opportunity to
perform such investment banking services, unless in the reasonable exercise of
the business judgement of the Board of Directors of Parent such engagement would
result in a conflict of interest or would otherwise be adverse to the interests
of Parent or such subsidiaries. Ardshiel shall receive a fee for any such
services rendered by Ardshiel to Parent or its subsidiaries which fee shall not
be greater than 2% of the total purchase or sale price for such business or
entity and shall be payable upon consummation of such sale or purchase. The
consent of GEIPPPII is required prior to the payment by Parent or any of its
subsidiaries in paying similar fees to other entities for similar services.
Parent paid a closing fee of approximately $3,375 in 1998 upon the consummation
of the Merger and paid Ardshiel's fees and expenses in connection therewith and
$1,352 in 1999 upon the consummation of the acquisitions of Darby-South, Heat
and Champagne. The Management Agreement will remain in effect until October 2,
2008 and will automatically be renewed for one-year periods unless either party
gives written notice to the contrary at least 30 days prior to the expiration of
the initial or any extended term of the agreement.

    NOTES RECEIVABLE

    Included in prepaid expenses and other current assets are the following
receivables due from related parties at December 31:

<TABLE>
<CAPTION>
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Receivables from officers and shareholders'.................    $ 76       $123
Receivables from employees..................................    $106       $211
</TABLE>

                                      F-26
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

14. COMMITMENTS AND CONTINGENCIES:

    EMPLOYMENT AGREEMENTS

    The Company has entered into employment agreements with several key
executives of the Company including its Chief Executive Officer, President and
Chief Financial Officer, its Chief Operating Officer and several Divisional
Presidents, Vice Presidents, General Managers and Sales Managers of the
Company's divisions. The agreements generally provide for terms of employment,
annual salaries, bonuses, and eligibility for option awards and severance
benefits.

    OPERATING LEASES

    The Company has entered into operating lease agreements for office and
manufacturing space, automobiles, and machinery and equipment with unrelated
third parties, affiliates of certain stockholders and certain stockholders of
the Company. Total rent expense for 1999, 1998, and 1997 was $8,414, $2,862, and
$1,189, respectively. Of these totals, amounts paid to related parties was
$1,323, $398 and $0 for 1999, 1998 and 1997, respectively. The Company
terminated its lease agreements with related parties in November 1999 and
entered into replacement lease agreements with unrelated third parties. Future
minimum rents due under operating leases with initial or remaining terms greater
than twelve months are as follows:

<TABLE>
<CAPTION>
                                                               TOTAL
                                                              --------
<S>                                                           <C>
2000........................................................  $ 8,745
2001........................................................    7,951
2002........................................................    7,032
2003........................................................    6,393
2004........................................................    5,628
Thereafter..................................................   40,197
                                                              -------
                                                              $75,946
                                                              =======
</TABLE>

    Certain of these lease agreements provide for increased payments based on
changes in the consumer price index. Additionally, under certain of these lease
agreements the Company is obligated to pay insurance and taxes.

    FORWARD COMMITMENTS

    The Company has contracts with various suppliers to purchase aluminum for
use in the manufacturing process. The contracts vary from one to twelve months
and are at fixed quantities with fixed and floating prices. As of December 31,
1999, the Company had forward commitments totaling $10,321 for delivery through
December, 2000 for 74,813,000 pounds of aluminum, of which 12,800,000 pounds
were at fixed prices. As of December 31, 1998, the Company had forward
commitments totaling $2,623 for delivery through December 1999 for 21,100,000
pounds of aluminum, of which 3,600,000 pounds were at fixed prices.

    CONTINGENCIES

    The Company is party to various claims, legal actions and complaints arising
in the ordinary course of business. In the opinion of management, all such
matters are without merit or are of such kind, or involve such amounts, that an
unfavorable disposition would not have a material effect on the consolidated
financial position, results of operations or liquidity of the Company.

                                      F-27
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

14. COMMITMENTS AND CONTINGENCIES: (CONTINUED)

    During 1993, factory employees voted to unionize and become members of
Amalgamated Clothing and Textile Workers Union. A three-year union contract was
executed during 1995 and extended for three additional years in 1998. In
addition, in connection with its Woodville, Texas operations, the Company is
party to collective bargaining arrangements due to expire in 2001.

    The Company is involved in various stages of investigation and cleanup
related to environmental protection matters, some of which relate to waste
disposal sites. The potential costs related to such matters and the possible
impact thereof on future operations are uncertain due in part to: the
uncertainty as to the extent of pollution; the complexity of Government laws and
regulations and their interpretations; the varying costs and effectiveness of
alternative cleanup technologies and methods; the uncertain level of insurance
or other types of recovery; and the questionable level of the Company's
involvement. The Company was named in 1988 as a potentially responsible party
("PRP") in two superfund sites pursuant to the Comprehensive Environmental
Response Compensation and Liability Act of 1980, as amended (the Chemical
Recycling, Inc. site in Wylie, Texas, and the Diaz Refinery site in Little Rock,
Arkansas). The Company believes that based on the information currently
available, including the substantial number of other PRP's and relatively small
share allocated to it at such sites, its liability, if any, associated with
either of these sites will not have a material adverse effect on the Company's
consolidated financial position, results of operations or liquidity.

    Atrium owned one parcel of real estate that requires future costs related to
environmental clean-up. The estimated costs of clean-up have been reviewed by
third-party sources and are expected not to exceed $150. The previous owner of
the property has established an escrow of $400 to remediate the associated
costs. This property was sold in December 1999. The Company has established a
letter of credit of $450 to cover any costs of remediation exceeding the
previous owner's escrow. The Company believes this reserve is adequate to cover
costs associated with this clean-up. No additional liabilities are believed to
exist in regards to the Company's remaining operations.

15. OTHER INCOME, NET:

    Other income, net consists of the following for the years ended
December 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                       YEAR ENDED      YEAR ENDED
                                      DECEMBER 31,    DECEMBER 31,
                                          1999            1998
                                      -------------   -------------
<S>                                   <C>             <C>
Rental, interest and other income...      $174            $556
Gain on sale of assets..............        78              12
Other...............................        31               3
                                          ----            ----
                                          $283            $571
                                          ====            ====
</TABLE>

16. STOCK OPTIONS:

    The Wing Industries Holdings, Inc. Stock Option Plan (the "Plan") was
adopted on October 25, 1996 and amended on November 17, 1997 to provide certain
employees, officers and directors of Wing an opportunity to purchase Class A
voting common stock of Wing. Options available for grant under the Plan included
(1) "Incentive Stock Options" as defined in Section 422 of the Internal Revenue
Code of 1986, as

                                      F-28
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

16. STOCK OPTIONS: (CONTINUED)
amended and (2) Nonqualified Stock Options which were options that did not
constitute Incentive Stock Options.

    At December 31, 1997, Nonqualified Stock Options for a total of 14,483
shares of Wing's Class A voting common stock had been granted. During 1998, and
prior to the Recapitalization, 1,766 options were exercised. The remaining
12,717 options were exchanged for 2,528,314 options in the D and W
Holdings, Inc. 1998 Stock Option Plan (the "1998 Plan"). The Plan was terminated
in connection with the Recapitalization. No compensation expense was recorded
during 1997.

    THE 1998 PLAN

    In connection with the Recapitalization, the Board of Directors of D and W
adopted the 1998 Plan authorizing the issuance of 11,991,142 options to acquire
common stock of D and W. Upon consummation of the acquisitions of Heat, Inc. and
Champagne Industries, Inc., the 1998 Plan was amended to increase the number of
shares of options available for grant to 14,991,142. Through December 31, 1999,
the Board of Directors had granted 11,174,100 options under the 1998 Plan. All
options granted under the 1998 Plan expire ten years from the date of grant.

    As of December 31, 1999, 1,218,337 options had been granted in three
tranches under the 1998 Plan in replacement of certain of the options granted
under the Plan. These options consist of (a) options to purchase 462,090 shares
of common stock at an exercise price of $0.01 per share; (b) options to purchase
385,227 shares of common stock at an exercise price of $0.96 per share until
December 1, 2000; and (c) options to purchase 371,020 shares of common stock at
an exercise price of $1.56 per share until December 1, 2000. As of December 31,
1999, all of these options were fully vested.

    As of December 31, 1999, options of 431,978 with an exercise price of $1.25
had been granted under the 1998 Plan that become exercisable only as such time
at (each such event, a "Value Event") (a) D and W sells common stock in an
offering registered with the Securities and Exchange Commission, which
constitutes a Qualifying Public Offering (as defined in the 1998 Plan);
(b) D and W is merged or consolidated with another corporation in a merger in
which the surviving corporation has freely tradeable common stock; or
(c) substantially all of the assets of D and W and its subsidiaries, taken as a
whole, are sold or otherwise transferred.

    As of December 31, 1999, options of 832,314 had been granted that consisted
of two tranches: (a) - options to purchase 277,438 shares with an exercise price
of $0.96 per share to March 31, 2000 and then increasing 15% per year thereafter
and (b) - options to purchase 554,876 shares with an exercise price of $1.08 per
share to March 31, 2000 and then increasing 30% per year thereafter. For the 15%
and the 30% options, if the holder chooses not to exercise at time of vesting,
the strike price increases annually to the next level until expiration. At
December 31, 1999 one-third of these options were vested. The remaining options
vest equally in one-third increments on January 9, 2000 and 2001, respectively.

    As of December 31, 1999, options of 221,725 with an exercise price of $1.65
had been granted that are exercisable only upon the occurrence of a Value Event.
These options vest at such time of occurrence of a value event.

                                      F-29
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

16. STOCK OPTIONS: (CONTINUED)
    As of December 31, 1999, options of 6,254,746 options had been granted with
exercise prices ranging from $1.00 to $1.50 per share. These options vest
ratably over periods ranging from three to five years. The options expire ten
years from the date of grant.

    Expenses related to the 1998 Plan are recorded at the Company since the
option holders that benefit from the 1998 Plan are employees of the Company. The
Company recorded non cash stock option compensation expense of $128 and $1,038
in 1999 and 1998, respectively, in connection with the difference between the
fair value of the stock at the date of issuance and the respective exercise
prices of each of the above grants and upon appreciation in the fair value for
variable options.

    THE REPLACEMENT PLAN

    In addition to the 1998 Plan, the Board of Directors of D and W adopted the
D and W Holdings, Inc. Replacement Stock Option Plan (the "Replacement Plan") to
govern the terms of certain options to purchase D and W's common stock which
were granted in replacement of outstanding options of Corp in connection with
the Recapitalization. Under the Replacement Plan, options to purchase in
aggregate of 1,575,000 shares of the Company's common stock were granted in
exchange for outstanding options of Corp which were not cashed out pursuant to
the Merger Agreement. Upon consummation of the acquisitions of Heat, Inc. and
Champagne Industries, Inc., the Replacement Plan was amended to increase the
number of shares of options to 2,575,000. The options granted pursuant to the
Replacement Plan vest ratably over a period ranging from three to five years on
each anniversary date of the grant. The replacement options have exercise prices
ranging from $.01 to $.16 per share. As of December 31, 1999, 2,200,531 shares
of options are outstanding.

    Upon termination of the optionee's employment, D and W shall have the right
to repurchase the options. In the event termination was for cause, the price per
option repurchased will be equal to the lesser of $1.00 per underlying share and
the fair value per share of D and W's common stock, in either case, minus $0.01
per share. If termination is for other than cause, the repurchase price will
differ for the vested and unvested portions. The unvested portion will be
reacquired at a purchase price equal to the lesser of the fair value per share
and $1.00 per share, in each case, minus $0.01 per share and the vested portion
may be reacquired at a purchase price equal to the greater of the fair value per
share or $1.00 per share, in each case, minus $0.01 per share.

    On October 2, 1998, D and W issued two warrants (the "Warrants") to the then
President and Chief Executive Officer (the "Executive") of the Company. Pursuant
to the terms of the Warrants, the Executive is entitled to purchase 2,841,221
shares of common stock at any time subsequent to the Recapitalization. The
exercise price of the Warrants is $.01 per share. An additional 1,894,148 shares
may be purchased under the Warrants at an exercise price of $1.00, representing
the fair value on the date of grant upon the realization of an 8.0% internal
rate of return. The 1,894,148 options vest ratably each day for three years. The
Warrants will terminate on October 2, 2008. This Warrants was cancelled
June 30, 1998 in connection with the payment of $2,813 to the Executive. The
Company recorded non cash compensation expense of $2,813 for 1998, in connection
with the difference between the fair value of the stock at the date of issuance
($1.00) and the exercise price ($.01), associated with the above Warrants.

    In addition, in exchange for other Warrants to purchase common stock of
Corp, the Executive received Warrants to purchase 1,000,000 shares of D and W's
common stock at a price of $.01 per share

                                      F-30
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

16. STOCK OPTIONS: (CONTINUED)
with a term of twenty years. There is no unearned deferred compensation expense
for the Warrants given all expense was recorded through December 31, 1998. These
Warrants were also cancelled June 30, 1999 in connection with the payment of
$990 to the Executive.

    If an event or value event as previously defined were to become probable,
the difference between the option price and the then fair value would be charged
to earnings at that time.

    The following table summarizes the transactions of the 1998 Plan and the
Replacement Plan (combined) for the years ended December 31, 1999, 1998 and
1997.

<TABLE>
<CAPTION>
                                         DECEMBER 31,    DECEMBER 31,    DECEMBER 31,
                                             1999            1998            1997
                                         -------------   -------------   -------------
<S>                                      <C>             <C>             <C>
Outstanding awards, beginning of
  period...............................    13,310,941      2,849,863        2,078,473
Granted................................     2,990,531     13,310,941          771,390
Canceled or expired....................    (2,926,841)            --               --
Exchanged..............................            --     (2,528,314)              --
Exercised..............................            --       (321,549)              --
                                          -----------     ----------      -----------
Outstanding awards, end of year........    13,374,631     13,310,941        2,849,863
                                          ===========     ==========      ===========
Weighted average grant-date fair value
  of awards............................   $       .43     $      .64      $       .50
Weighted average exercise price of
  awards exercised.....................   $        --     $      .84      $        --
Weighted average exercise price of
  awards granted.......................   $       .88     $      .82      $      1.25
Weighted average exercise price, end of
  period...............................   $       .87     $      .85      $       .74
Awards exercisable, end of period......     4,092,392      1,064,030          461,937
Awards available for future grant......     4,191,511        255,201          731,415
</TABLE>

    The following table summarizes information about stock options and warrants
outstanding at December 31, 1999:

<TABLE>
<CAPTION>
                            OPTIONS OUTSTANDING
                     ----------------------------------    OPTIONS EXERCISABLE
                                   WEIGHTED               ----------------------
                                    AVERAGE    WEIGHTED                 WEIGHTED
                                   REMAINING   AVERAGE                  AVERAGE
 RANGE OF EXERCISE     NUMBER        LIFE      EXERCISE     NUMBER      EXERCISE
      PRICES         OUTSTANDING   (MONTHS)     PRICE     EXERCISABLE    PRICE
-------------------  -----------   ---------   --------   -----------   --------
<S>                  <C>           <C>         <C>        <C>           <C>
Options:
  $.01 - .16          2,662,621       107       $ .05        945,423     $ .01
  $.96 - 1.08         7,472,287       105       $1.00      2,747,557     $1.00
  $1.10 - 1.65        3,239,723       111       $1.23        399,349     $1.53
                     ----------                            ---------
                     13,374,631                            4,092,329
                     ==========                            =========
</TABLE>

    In 1995, the FASB issued FASB Statement No. 123 ("FAS 123") "Accounting for
Stock-Based Compensation" which, if fully adopted by the Company, would change
the methods the Company applies

                                      F-31
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

16. STOCK OPTIONS: (CONTINUED)
in recognizing the cost of the stock based plans. Adoption of the cost
recognition provisions of FAS 123 is optional and the Company has decided not to
elect the provisions of FAS 123. However, pro forma disclosures as if the
Company adopted the cost recognition provisions of FAS 123 are required by FAS
123; however, there is no pro forma effect of adopting the cost provisions of
FAS 123 for the years ended December 31, 1999, 1998 and 1997. During 1999, 1998
and 1997, the Company granted only nonqualified stock options and warrants under
the plans.

    The fair value of each stock option granted is estimated on the date of
grant using the minimum value method of option pricing with the following
weighted-average assumptions for grants in 1999, 1998 and 1997: dividend yield
of 0.0%; risk-free interest rate of 5.65%; and the expected life of 5 years. (In
determining the "minimum value" SFAS 123 does not require the volatility of the
Company's common stock underlying the options to be calculated or considered
because the Company was not publicly-traded when the options were granted).

    Had the compensation cost for the stock-based compensation plans and
warrants been determined consistent with FAS 123, the Company's net income
(loss) for 1999, 1998 and 1997 would have been $1,403, ($3,122) and $440,
respectively.

    The effects of applying FAS 123 in this pro forma disclosure are not
indicative of future amounts. FAS 123 does not apply to awards prior to 1995.

17. EMPLOYEE BENEFIT PLANS:

    The Company maintains an employees' savings plan under Section 401(k) of the
Internal Revenue Code (the "Code"). The Company makes discretionary matching
contributions equal to 50% of the first 4% of the employee's contribution. The
Company contributed $505, $101 and $85 during 1999, 1998 and 1997, respectively.

    In connection with the Recapitalization, the Company assumed Darby's plan
under Section 401 of the Code. The plan provided for discretionary contributions
by the employer. The plan did not provide for employee contributions. The
Company contributed $57 to the plans during the period from October 3, 1998 to
December 31, 1998. No contributions were contributed in 1999 and upon receipt of
a favorable tax determination letter from the Internal Revenue Service the plan
was terminated in October 1999 at which time a distribution of $1,710 was made
to eligible employees.

    Thermal maintains a qualified 401(k) and profit-sharing plan covering
substantially all of its employees. Under the terms of the plan, Thermal may
contribute up to 25% of the first 8% of each employee's compensation contributed
and may also make discretionary contributions to the plan. Total expense
recorded was $529 during 1999.

    During 1998, Best Built implemented a qualified 401(k) plan. Under the terms
of the plan, Best Built may contribute up to 25% of the first 8% of each
employee's compensation contributed. The total expense recorded was $17 during
1999.

    Champagne sponsors a 401(k) profit sharing plan covering substantially all
employees. Contributions are determined annually by the Board of Directors. The
total expense recorded was $67 during 1999.

                                      F-32
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

18. SUBSIDIARY GUARANTORS:

    In connection with the Company's Senior Subordinated Notes, the Company's
payment obligations under the Notes are fully and unconditionally guaranteed,
jointly and severally (collectively, the Subsidiary Guarantees) on a senior
subordinated basis by its wholly-owned subsidiaries: ADW-Northeast, ADW-
Arizona, ADW-West Coast, Heat, Champagne, Darby-South, Wing and Darby
(collectively, the Subsidiary Guarantors). The Company has no non-guarantor
direct or indirect subsidiaries. The operations related to the assets of
ADW-Northeast ADW-Arizona ADW-West Coast and Darby are included since the
reverse acquisition on October 2, 1998. The operations of Wing are presented for
all periods covered. The operations of Heat and Champagne are included since
their date of acquisition on May 17, 1999 and Darby-South since January 27,
1999. The balance sheet information includes all subsidiaries as of
December 31, 1999 and all subsidiaries acquired prior to January 1, 1999 as of
December 31, 1998. In the opinion of management, separate financial statements
of the respective Subsidiary Guarantors would not provide additional material
information, which would be useful in assessing the financial composition of the
Subsidiary Guarantors. No single Subsidiary Guarantor has any significant legal
restrictions on the ability of investors or creditors to obtain access to its
assets in event of default on the Subsidiary Guarantee other than its
subordination to senior indebtedness.

    Following is summarized combined financial information pertaining to these
Subsidiary Guarantors:

<TABLE>
<CAPTION>
                                                      DECEMBER 31,    DECEMBER 31,
                                                          1999            1998
                                                      -------------   -------------
<S>                                                   <C>             <C>
Current assets......................................    $  59,658       $ 42,887
Noncurrent assets...................................      206,938        157,678
Current liabilities.................................       26,118         16,666
Noncurrent liabilities..............................      200,620        123,049
</TABLE>

<TABLE>
<CAPTION>
                                                        TWELVE MONTHS ENDED
                                                           DECEMBER 31,
                                                      -----------------------
                                                         1999         1998
                                                      ----------   ----------
<S>                                                   <C>          <C>
Net sales...........................................  $ 318,053     $165,333
Gross profit........................................     91,673       37,340
Net income from continuing operations...............     (2,793)         503
Net income..........................................     (2,793)         503
</TABLE>

    The Notes and the Subsidiary Guarantees are subordinated to all existing and
future Senior Indebtedness of the Company. The indenture governing the Notes
contains limitations on the amount of additional indebtedness (including Senior
Indebtedness) which the Company may incur.

19. SUBSEQUENT EVENTS:

    WOODVILLE EXTRUSION SALE:

    On March 7, 2000, the Company sold certain equipment of its Woodville, Texas
extrusion operation for net proceeds of $1,170, including a $300 seller note.
The Company will record a long-term note receivable of $300 and will record a
gain of approximately $200 in the first quarter of 2000 from this sale.

                                      F-33
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

19. SUBSEQUENT EVENTS: (CONTINUED)
    ELLISON ACQUISITION:

    On March 29, 2000, the Company announced the signing of a definitive
purchase and sale agreement to acquire the assets of Ellison Window and Door and
the stock of Ellison Extrusion Systems, Inc. (collectively "Ellison") for a
combined purchase price of $125,000. The acquisition proceeds include
approximately $101,500 of cash, $500 of assumed indebtedness and $23,000 of
D and W stock. The cash portion of the acquisition will be funded through a
combination of approximately $78,500 of new equity from D and W in the form of
common equity and/or preferred stock with the remainder coming from an
additional borrowing on the Company's existing Credit Agreement.

    The acquisition will be accounted for as a purchase in accordance with
APB 16. The aggregate purchase price will be allocated to the underlying assets
and liabilities based upon their respective estimated fair market values at the
date of acquisition. Based on preliminary estimates which will be finalized at a
later date, the excess of purchase price over the fair value of the net assets
acquired ("goodwill") will be approximately $96,000, which will be amortized
over 40 years. The results of operations for the acquired business will be
included in the Company's operations subsequent to the completion of the
transaction, which is expected to be on or about May 15, 2000.

                                      F-34
<PAGE>
                             ATRIUM COMPANIES, INC.

                                  SCHEDULE II

                       VALUATION AND QUALIFYING ACCOUNTS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                          COLUMN C -
                                                          ADDITIONS
                                                  --------------------------
                                     COLUMN B -       (1)            (2)
                                     BALANCE AT    CHARGED TO     ACQUIRED       COLUMN D -      COLUMN E -
                                     BEGINNING     COSTS AND       THROUGH      DEDUCTIONS -     BALANCE AT
COLUMN A - DESCRIPTION               OF PERIOD    EXPENSES (A)   ACQUISITION   WRITE-OFFS (B)   END OF PERIOD
----------------------               ----------   ------------   -----------   --------------   -------------
<S>                                  <C>          <C>            <C>           <C>              <C>
Allowance for doubtful accounts:
  Year ended December 31, 1997          $830         $1,791         $ --            $(1,896)       $  725
  Year ended December 31, 1998          $725         $3,059         $ --            $(3,006)       $  778
  Year ended December 31, 1999          $778         $3,990         $344            $(3,442)       $1,670
</TABLE>

(a) includes $2,867, $2,832 and $1,731, respectively for 1999, 1998 and 1997
    sales returns and allowances.

(b) net of recoveries.

                                      S-1
<PAGE>
                    ATRIUM COMPANIES, INC. AND SUBSIDIARIES
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                       DESCRIPTION OF EXHIBITS
       ------                                       -----------------------
<C>                     <C>       <S>
         2.1                   -- Asset Purchase Agreement, dated as of March 4, 1998, among
                                  Masterview Window Company LLC, Atrium Companies, Inc. and,
                                  for the limited purposes set forth therein, BancBoston
                                  Ventures, Inc. (3)
         2.2                   -- Agreement and Plan of Merger, dated as of August 3, 1998, by
                                  and among D and W Holdings, Inc., D and W Acquisition Corp.,
                                  Atrium Corporation, and the securityholders named
                                  therein (4)
         2.3                   -- Amendment No. 1 to the Agreement and Plan of Merger, dated
                                  as of October 2, 1998, by and among D and W Holdings, Inc.,
                                  D and W Acquisition Corp., Atrium Corporation and the
                                  securityholders named therein (5)
         2.4                   -- Amendment No. 2, dated as of April 14, 1999 to the Agreement
                                  and Plan of Merger by and among D and W Holdings, Inc., D
                                  and W Acquisition Corp., Atrium Corporation and the
                                  securityholders named therein (5)
         2.5                   -- Stock Purchase Agreement, dated as of May 10, 1999, among
                                  Champagne Industries, Inc. and Atrium Companies, Inc. (6)
         2.6                   -- Stock Purchase Agreement, dated as of April 20, 1999, among
                                  Heat, Inc., shareholders and optionholders named therein,
                                  H.I.G. Vinyl, Inc., H.I.G. Investment Fund, H.I.G. Capital
                                  Management, Inc. and Atrium Companies, Inc. (6)
         2.7                   -- Amendment No. 1, dated as of May 17, 1999, to the Stock
                                  Purchase Agreement dated as of April 20, 1999, among Heat,
                                  Inc., shareholders and optionholders named therein, H.I.G.
                                  Vinyl, Inc., H.I.G. Investment Fund, L.P., H.I.G. Capital
                                  Management, Inc. and Atrium Companies, Inc. (6)
         3.1                   -- Certificate of Incorporation of Atrium Companies, Inc., as
                                  amended (1)
         3.2                   -- Bylaws of Atrium Companies, Inc. (1)
         4.1                   -- Indenture, dated as of May 17, 1999, by and among Atrium
                                  Companies, Inc., the Guarantors named therein and State
                                  Street Bank and Trust Company (6)
         4.2                   -- Registration Rights Agreement, dated as of May 17, 1999, by
                                  and among Atrium Companies, Inc., the Guarantors named
                                  therein and Merrill Lynch & Co., Merrill Lynch, Pierce,
                                  Fenner & Smith Incorporated (6)
        10.1                   -- Employment Agreement between the Company and Louis W. Simi,
                                  Jr. dated January 1, 1998 (2)
        10.2                   -- Stockholders Agreement, dated as of October 2, 1998, by and
                                  among D and W Holdings, Inc., and the stockholders signatory
                                  thereto (4)
        10.3                   -- Credit Agreement dated as of October 2, 1998 by and among
                                  Atrium Companies, Inc., as Borrower, D and W Holdings, Inc.,
                                  the Guarantors party thereto, Merrill Lynch & Co., Merrill
                                  Lynch, Pierce, Fenner & Smith Incorporated, as Lead
                                  Arranger, Syndication Agent and Documentation Agent, and
                                  BankBoston, N.A., as Administrative Agent, and the Lenders
                                  party thereto (4)
        10.4                   -- Amendment and Consent No. 1, dated as of May 5, 1999, to the
                                  Credit Agreement dated as of October 2, 1998, by and among
                                  Atrium Companies, Inc., D and W Holdings, Inc., Merrill
                                  Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
                                  Incorporated and BankBoston (6)
</TABLE>

                                      E-1
<PAGE>
<TABLE>
<C>                     <C>       <S>
        10.5                   -- Amendment No. 2, dated as of June 11, 1999, to the Credit
                                  Agreement dated as of October 2, 1998, by and among Atrium
                                  Companies, Inc., D and W Holdings, Inc., Merrill Lynch &
                                  Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and
                                  BankBoston (6)
        10.6                   -- Amendment and Waiver No. 3, dated as of November 17, 1999,
                                  to that certain Credit Agreement, dated as of October 2,
                                  1998 by and among Atrium Companies, Inc., D and W
                                  Holdings, Inc., Merrill Lynch & Co., Merrill Lynch, Pierce,
                                  Fenner & Smith Incorporated and Bank Boston (7)
        10.7                   -- Amendment and Waiver No. 4, dated as of March 24, 2000, to
                                  that certain Credit Agreement, dated as of October 2, 1998
                                  by and among Atrium Companies, Inc., D and W
                                  Holdings, Inc., Merrill Lynch & Co., Merrill Lynch, Pierce,
                                  Fenner & Smith Incorporated and Bank Boston (7)
        10.8                   -- Management Agreement, dated as of October 2, 1998, by and
                                  among Ardshiel, Inc.,
                                  D and W Holdings, Inc., Atrium Corporation and Atrium
                                  Companies, Inc. (5)
        10.9                   -- Amended and Restated Management Agreement, dated as of
                                  May 17, 1999, by and among Ardshiel, Inc., D and W Holdings,
                                  Inc., Atrium Corporation and Atrium Companies, Inc. (6)
        10.10                  -- Employment Agreement, dated as of March 28, 2000, by and
                                  between D and W Holdings, Inc. and Frank E. Sheeder (7)
        10.11                  -- Employment Agreement, dated as of October 2, 1999, by and
                                  between D and W Holdings, Inc., Jeff L. Hull (7)
        10.12                  -- Employment Agreement, dated as of October 2, 1998, by and
                                  between D and W Holdings, Inc., R.L. Gilmer (5)
        10.13                  -- Employment Agreement, dated as of January 8, 1998, by and
                                  between Door Holdings, Inc. and Cliff Darby (5)
        10.14                  -- Buy-Sell Agreement, dated as of October 2, 1998, by and
                                  among D and W Holdings, Inc., GE Investment Private
                                  Placement Partners II and R.L. Gilmer (standard
                                  agreement) (5)
        10.15                  -- Buy-Sell Agreement, dated as of October 2, 1998, by and
                                  among D and W Holdings, Inc., GE Investment Private
                                  Placement Partners II and Cliff Darby (5)
        10.16                  -- D and W Holdings, Inc. 1998 Stock Option Plan (5)
        10.17                  -- Amendment No. 1, dated as of May 17, 1999, to the D and W
                                  Holdings, Inc. 1999 Stock Option Plan (6)
        10.18                  -- D and W Holdings, Inc. 1998 Replacement Stock Option
                                  Plan (5)
        10.19                  -- Amendment No. 1, dated as of May 17, 1999, to the D and W
                                  Holdings, Inc. Replacement Stock Option Plan (6)
        10.20                  -- Termination Agreement, dated as of October 2, 1998, between
                                  Atrium Corporation, Atrium Companies, Inc., Hicks, Muse &
                                  Co. Partners, L.P. and Hicks, Muse, Tate & Furst
                                  Incorporated (5)
        10.21                  -- Agreement and Release, dated as of March 31, 1999, by and
                                  among Randall S. Fojtasek and D and W Holdings, Inc., Atrium
                                  Corporation, Atrium Companies, Inc., Ardshiel, Inc., GE
                                  Investment Management Incorporated, GE Investment Private
                                  Placement Partners II, a Limited Partnership and the parties
                                  named therein (5)
        10.22                  -- Warrant Purchase Agreement, dated as of June 30, 1999, by
                                  and among Randall S. Fojtasek, D and W Holdings, Inc.,
                                  Ardshiel, Inc. and GE Investment Private Placement Partners
                                  II, a Limited Partnership (7)
        10.23                  -- Escrow Agreement, dated April 20, 1999, among Atrium
                                  Companies, Inc., H.I.G. Vinyl, Inc. and Bank One, Texas,
                                  N.A. (6)
        10.24                  -- Escrow Agreement, dated May 17, 1999, among Atrium
                                  Companies, Inc., selling stockholders named therein and Bank
                                  One, Texas, N.A. (6)
</TABLE>

                                      E-2
<PAGE>
<TABLE>
<C>                     <C>       <S>
        10.25                  -- Indemnification Escrow Agreement, dated as of October 2,
                                  1998, by and among Hicks, Muse Fund III Incorporated, D and
                                  W Holdings, Inc. and Northwest Bank Texas, N.A. (5)
        10.26                  -- Amendment No. 1, dated April 14, 1999, to Indemnification
                                  Escrow Agreement by and among Hicks, Muse Fund III
                                  Incorporated, D and W Holdings, Inc. and Northwest Bank
                                  Texas, N.A. (5)
        12.1                   -- Computation of Ratio of Earnings to Fixed Charges (5)
        21.1                   -- Subsidiaries of the Company (7)
        24.1                   -- Powers of Attorney (7)
        27.1                   -- Financial Data Schedule (7)
</TABLE>

------------------------

(1) Incorporated by reference from the Registrant's Registration Statement on
    Form S-4, dated April 4, 1997, SEC File No. 333-20095.

(2) Incorporated by reference from the Registrant's Report on Form 10-K, dated
    March 31, 1998.

(3) Incorporated by reference from the Registrant's Report on Form 8-K, dated
    March 27, 1998 and filed on April 13, 1998.

(4) Incorporated by reference from the Registrant's Report on Form 8-K, dated
    October 2, 1998 and filed on October 19, 1998.

(5) Incorporated by reference from the Registrant's Report on Form 10-K, dated
    March 31, 1999 and filed on April 15, 1999.

(6) Incorporated by reference from the Registrant's Registration Statement on
    Form S-4, dated July 15, 1999, SEC File No. 333-82921.

(7) Filed herewith.

                                      E-3